27 26 24 23 25 lAJfl_ 1 Contents 1914 TABLE 4 17 6 lZ TABLE 5 9 11 21415 16 S Introduction TABLE 2 20 22 13 1032 7 TABLE 3 8 18 S_gRYEBR Off QUALIFICATIOK_ I AJ_TL_IK_TIONS 1939-1983 PENSION PLAN CR.EATIONAND GROWTH i BY TYPE OF PLAN i FOR YEARS PENSION PLAN GROWTH PENSION PLAN GROWTH the Theamount Congress of themust contribution. decide howIncertain addition, it wishes earnings toon bethe about total theassets annualin of combination ifAn the oThe there Mr. There empl Final account establishment ooChairman, yer are must are with Pay wcould, oalso can rkers covSocial Pension: er be traditional itawith affected for ofsubstantial Securit is employer example, se For averal pleasure by y andifferences will the years plans, integrated adopt number amounts maintain tooaas fappear of defined tenure noted, between employees plan contributed, antoday who the has benefit estimable DBwill formula on in and been an this plan be DC theindustry steady might cplans portion most opro vimpact ered viding be important that in since of byof have athe the ForSome Indexation--Private oThe In this 81 defined ha most percent vepurpose proposed prominent benefit use employee 10ELIGIBILITY that pension year defined type a defi cliff benefits ofn plans, ed AND plan benefit vesting. coIN nin tribution Fare LATION asterms plans in generally PROTECTION of most program have the group number valued generally be established of insurance at covered current not and and year ser both vice employers would CORPORATE notand qualif AND employees y SEthem LF-I_IPLOYE forvalue earl Dy PENSION them. retirement, PLAN Employers qUALIFICATIONS death, have termination, found that or Plan Design 1955 to 1983 monthly benefit will vary depending on factors such as age, sex and h_x=ber o£ Number o£ Net Number Increase in Net t RETIREMENT BENEFITS AS A H_kN BY RESOURCES TYPE OFTOOL PLAN 1 Tt_dvlINATIONS AND NET PLANS (_,.EATED pro arrangements, vided for a the utomatic principalbenefit is adjustments one of equal in benefits. recognition Equal of Period Qualification Terminations of Plans Number of Plans Annual Defined Benefit Plans Defined Contribution 1956-1983 Plans Total Pension Plans cost of the Net retirement Total program. As we learned during the 1970s, vstatistical eryevolved an mIRA odestare because series a levtax-deferred el particular othey fbegan benefits are geographic inuntil perceived 1939 andretirement, (Table supplement 1956-1983 area; differently I). andwhen By such September distributions by benefits workers. 30, under 1983 from The there athe defined perceived account were in participating vpreretirement cost. subject estment inflation o benefits 9 1.5In percent of gains percent addition, retirement due workers arestandard o require rtorarely l of othe sses, when areincome the employee of problem of athe oliving. remplo the consultin the provision same defined yof ee's contributions. value gunanticipated The as benefits final oDC ffirm benefit for distributed plan Federal five- isprovides y of ear type. cost. asked equal employees plan avMost erage Most to vaalue, clearl f do omajor rfeitures. employers awho earnings because comparability y perceptible are employers subject that retirement retirement newthe Many, plan. government date. and programs This perhaps ability guarantee meetmost, moral toaemployers grant fixed and social rate past nowof needs feel service interest. as that well credits theSome asprimary corporate have is objective particularly suggbusiness estedin disabilit Over y the benefits past few under years, a defined inflation benefithas plan brought do qualify the financial for such plight benefits of F.rdir_ gullrggs to Date to Date in Effect Over Previous Period Crowth COMPARABILITY ANALYSIS 2 Plans Defined Defined Total Plans ha employees ve provided vary for as ad to age, hoc adjustments sex, and otherin recognition risk characteristics. of a portion of Yearly Ct_ulative Yearly Cumulative Yearly Cumulative inflation Number N increases. uYear mber Defined % Number BenefitNumber % Defined % Contribution Number Number % unanticipated _pt. inflation 30, 1983a/ can '958,55 play 1 havoc 1with 54,608 costs. 803,943 38,B0 5.0 nearly contributi Year to accrual needs. areSocial o804,000 ntaxed of Defined Security. Created plan. at empl a capital regular oyer Benefit InThe Benefit plans thisstock rates. studious Plans manner, in effect. Contribution inAthe approach theperson defined costDefined being risk with Total contribution under Contribution taken an Plansunemployed the by this defined plan % Growth Plans Committee raises spouse benefit the may is that also growing assessment attracti Empl Capital sponsor a times oyers return oaccount veemployers' accumulation his relati ad defined where opt vabo years ebalance. v defined an etoinflation of contributions contribution employer other service orA codefined ntributi problem companies, is be (or onoguaranteed. ffering plans contribution plan to that plans aparticipation) many the single for a pension fobenefits workers rIt workers. plans fund amust nufor mber are are b deli have e minus the Only vnoted o ered also set f first reas is one-half recently forth sponsored ons are that in :time. in comparing compared this ha a by vThis e under a defined contribution plan. Many employees prefer full and immediate the maintaining pensioneror into adopting sharpa focus. retirement Retired planemployees is to living provideonfuture fixedretirement pensions, A third major type of defined contribution plan is the thrift or savings Created Dec. 3Cr 0,eated 1982 Growth 906,07 Cr1eated Create 1d 40,255 Growth 76Cr 5,813 eated Created 70,200Growth I0.I GENERAL DESIGN 3 Total Net In summary, defined contribution plans define individual equity in Dec. 31, 1981 820,720 125,107 695,613 68,095 10.9 1956 60.3 FINANCING 39.7 as well as the cost of those benefits. planto employee's is contribute The be wnoould Plans tapplauded greatest Plan the belabor Design case an minimized consciousness extra number as agreement. with Plans one $250 the and ofthat participants fper the ederal Netshould of year cPlans ombined the government to always an value retirement are Plans IRA. bein but followed of de may accumulating fbenefits ined Plans be by important benefit the Net could assets. plans, Congress Plans 7if meetcurrent with the when Plans The the th1955 1956 the ere o These majority terms a/orelative T of been heManagement D his design e of c. empl 4,944 of signs primary 31, 16,226 equal values oemployers. yer 1980 decisions ofof may Social of employer awork 2,983 the use 739mo ,1Security two 83 ha the force vement vcontributions etypes plan 15,712 been size 1,961 benefit. 1tof 11,66 to o and made plans. supplement 5total composition and and 627, For 34,882 pro accept The 51a 8agreed an vision nonintegrated defined existin the is 29,938 made gto necessarily through 5benefit 6,063 for defined easier 16.5 plan specific defined isbystated 9.8 would income no longer to employees. be a fixedInpercentage addition,ofthey payroll have progan ram interest and fromin a "funding using such plan. or payment on Theseincomes under plansthederived typically defined from contribution permit the investment employees plan of to a the to lump continuing contribute sum distribution income from 2 proto vided 6at 1956 -- 2,985 19, 1957 Z09 18.4t 55.1 1,961 15,675 14.3t 44.9 4,944 34,88Z 16.5% Plan Type 7 unequal benefits that equal contributions provide. Defined benefit 1957 6,074 3,347 2,727 40,956 17.4 Year Qualified Terminated Created Qualified Terminated Created Created 1957 3,547 2Z,556 17.4 2,727 18,400 17.4 6,074 40,956 17.4 l_ec. 31. 1979 669.841 98,386 571,455 46.036 8,8 Plan Characteristics 1958 55.9 44.1 9 in accumulated The flow normal termsconcept value while of the of defined advance the asset funding contribution is also a pension muchismore a program stock. portable is difficult than a vested to defined necessary contribution economic oEmployer contribution Defined stasecurity ndards plans pension contribution following ois f adequacy. at plans programs stake. termination frequently employer provide And, there several pensions ofbeing awdefined ouldkinds provided -be those benefit of a benefits: greater that asplan. promise supplemental abilityearly afor and uncertainty" reasons. workers plans o This benefit the 64retirement They define are "quality" percent percentage standpoint given pla hav n equity e ; been programs. sponsor the assessment might option explicitly inwould savings terms simpl and is Older take y encouraged and undertaken of be plans onworkers implicitly 1.25 equal characteristics andpercent benefits 20 to since can percent supported transfer (used leave a of relati and sponsor bemployment a yvto by ely defined accept 74the Federal percent profit new new the benefit with program. company law. 195 1958 bprograms y8 the 3,659 defined to6,551 help 26,215 benefit maintain 16.2 3,659 plan. the Z,892 organization's 21,2,892 292 15.7 47,507 efficiency 6,551 47,507 and vitality. 16.0 16.0 Such percent retirement, of theirhave paybeen voluntarily. hurt by Employer the declining contributions value are of usually the dollar. a fixed The Dec. 31, 1978 612,964 87,545 525,419 50,398 10.6 1959 3,554 29,769 1959 13.6 52.3 3,238 24,530 15.2 47.7 6,792 54,299 14.5 Comparing Defined Benefit and Defined Contribution Plans 12 1959 necessarily IX_c.6,792 31, unequal 1977 employer 3,554 547,280 contributions. 3,238 72,259 4 3754,299 /5,021 19,601 14.2 4.3 1956 3,175 192 2,983 2,072 Iii 1,961 4,944 Dec. 31.1960 1976 511.86 50.1 4 56,444 4549.9 5,420 10,007 2.2 Multiple Plan Sponsorship 16 apply arrangements. defined normal to gi Federal retirement, vbenefit en Since contribution programs promise. survivors, 1975,if howe with The funds vdisability er, individually thedefined appropriated ultimate and contributi assigned benefit other are ogenerally in assets ancillary nvested planscan ha in being vbe benefits. government e been liquidated thetheIn program. the1960 with Comparability o retiree Design The IThe retirees sharing toappear 98 empl stock of to9,399 percent oretirement acc today yer can plans--both omm and Analysis. may promise oof in date flow vmy plans). iew 4,711 plans unanticipated differentials acapacity of itgiGeneral ven which as hasa benefit re 4,688 first as could vol Design. inflati vin President ed step be the at oaround n.sponsored ttwo o63,698 award Eligplan lower aibility ofnumber retirement by tthe ycost pes aof Employee government ancan common d than inc 17.3 I on me be flation an issues Benefit easily older automatic It is income also increases important and dignity. ininSocial the Younger case Security of workers benefit benefits can enhancements. movprovided e up the Under forladder. byDB lawplans have 1957 percentage goals 3,527 require of employee that 180 contributions--most plans 3,347 be available 2,898 commonly for long 50171 percent, periods but 2,727of sometimes benefit 6,074 1960 Comparing 4,711 Defined 34,480 Benefit 15.8 and 4,688 Defined 29,218 Contribution 19.1 9,399 Plans 63,698 2__/ 17.3 Dec. 31, 1975 485,944 40,531 445,413 21,931 5.2 Conclusion 1961 52.5 47.5 17 1961 1961 In 4, addition 545 8,652 39,025 to these 13.4,545 2 equity 4,107 differences 33,325 4,107 14.1 that72,350 8,652 apply 72,350 under the13.6 13.6 ceteris 1958 3,883 224 3,659 3,071 179 2,892 6,551 Dec. 31. 1974 455,905 32,423 423,482 54,601 14.8 1962 4,712 43,737 1962 12.1 50.3 4,647 37,972 13.9 49.7 9,559 81,709 12.9 securities and unit. reinvested . Withinin thean context individual of the unified retirement budget, account, we would making onlythem escape highly Protectio fastest for Research reconciled addition, Alternati many Both n.growing years. final vely, Institute, defined many Financin by actuaries component account plans gan . contribution acoordinate empl Washington, Co balance. and of v oerage. yertheeconomists. pension with their and The DC a defined benefit universe. employee based defined For nonprofit, the or benefit cbears ontributi contribution individual the onplans nonpartisan risk pr worker ostructure fit are of poor sharing the organized public stock with company 1962 such There The security enhancement flat that is Dec.a9,359 31.precedent benefit has fo 197 r 3many can his be empl retirees. formula regarding 4,712 3granted 96 o,5 yees; 20 isthe Ion most make 4,647 27,6 the question frequently 39 thisbasis point 368,881 81,709 ofof found whether inprior order in service. union-negotiated 55,or 475to not 12.9 stress With a 1new 7.7 that a DC accumulation. Productivity For career and morale employees may bewhoenhanced. do not change jobs frequently, the 1959 3,824 270 3,554 3,442 204 3,238 6,792 higher. helped, Thrift but often andnotsaenough vings for plansabove=average are frequentlyearners. offered as supplemental 1963 5,399 49,136 12.3 4,851 42,823 12.8 10,250 91,959 12.5 1963 52.7 47.4 ELIGIBILITY Dec. 31, AND 1972INFLATION 336,91 PROTECTION 5 23,509 313,406 45,815 18 17.1 1963 10,250 5,399 4,851 91.959 12.5 1964 6,072 55,208 12.4 4,595 47,418 10.7 10,667 102,626 11.6 1960paribus 5,011 conditions, 300 there are 4,711 other differences 4,946 in 258 the two 4,688 approaches 9,399 to Statement of Dec. 31, 1971 287,580 19,989 267,591 37,329 16.2 1964 56.9 43.1 the uncertainty of the willingness of future taxpayers fully by investing 1965 6,98 investment 3 62,191 returns 12.6 5,513 and receives 52,931 the 11.6benefits 12,496 of 115,122 good inv12.2 estment Social o The Security. employer wishes These toplans avoid are long-term said to funding be integrated and liabilitywith Social system pla plans. npolicy 1964 concept portable. EBRI Employer o coshould 100 uld The ismay research percent prepared career 10,667 ad This use Role--Traditionally be optmore the cpay pro oaorganization mbined to vsame ide easil defined and help 6,072 trust employer y final perception understood in any benefit as padedicated yemployers way the contributions. formulas 4,595 ofthat during old. plan a definable to we are have In increasing the s ca 102,626 olely nthe more .period desi asset, early tg ooften ned guara knowledge of 1970s, programs along naccumulation, tee foundwith the 11.6 aof in and certain Uemployee relative n plans itedbut any plancomparisons othis Management is far must more of taxes complicated, be made for with both if not care. thepractically employer A new retirement impossible. and employee system for is new protection defined retirement benefit when plans. employers planWithout provides also inferring a known offer who result other actuall with defined y minimum bears benefit employee the or incidence risk. defined of MostDeemployers c. 31, I970 are both 246.916 aware of 16,654and concerned 230,26Z about 30,268 the financial 15.1 1966 9,521 71,712 15.3 7,452 60,383 14.1 16,973 132,095 14.7 1965 55.9 44.1 FINANCING 19 have directly made Pension most Plan contributions Growth byto Type plans. of Plan a/ pen1965 sion provisio 12,496 n that arise 6,983 because5,513 other 115,122 things are not always 12.2equal. 1961 1967 4,919 10,690 82,402 374 14.9 48,524 ,545 68,907 4,46814.1 19,214 361151,509 4,107 14.5 8,652 Dallas L. Salisbury* Dec. 31, 1969 214 342 14,348 199 994 26,346 15.1 1966 56.1 43.9 Federal retirement program assets in the private sector. it benefits portability I o thank is 84returns. percent the through you flow may forprovide research the combine Profit-sharing of opportunity income more and tothan education. that account to oneplans work is investment for important with EBRI aretypically you one option. does today. inform retirement. not shorter of takevesting defined pro A person's orincon DC Mine minimum for1968 hires 1966 Security.! salaried Workers c12,224 ole mmitments may enhanced vel 16,973 /split require employees. o94,6 f retirement 26by and their a retirement requirements; lower 18.89,521 The plans benefits--e.g., i0,I15 total latterand programs. cost 79,022 isestablished 7,452 most to produce common 14.7 40 Contributions 132,095 apercent 22,3 new equi today. 39 valent and 173,648 different oftofinal benefits plans, 14.8 14.7 pay--fr plan like oto mfor an An important reason that it is difficult to provide such retroactive contribution plans. 1962 problems program Plan 5,188 Typeof coststheir , 476 most pensioners. of these 4,712Few, programs however, 5,030 are are largelyable 383 supported to provide 4,647 by automatic emplo 9,359 yer President Dec. 31, 1968 186 267 12,619 173 648 22,339 14.8 1969 15,8!4 108,450 14.6 12,522 91,544 15.8 26,546 199,994 15.2 COVI_,AGE 1967 55.6 Percent 44.4 Percent 20 Individual Roles--Direct employee contributions have generally been These 1967arise partly 19,214 because10,690 of the inherent 8,524 differences 151,309 in the two14.5 types of Dec. 31, 1967 162 485 11,176 151 309 19,214 14.5 1963 5,840 441 5,399 5,304 453 4,851 10,250 Employee Benefit Research Institute Years 1968 54.7 Defined Benefit 45.3 Defined Contribution InRetirement other words, income evenprograms a "fully werefunded" initially defined provided contribution as a gratuity program to standard plans. Although These restricted contribution D numbers eFor c.of 31, plans the living to 1966 indicate highly sa arevings plan. is141 intended mo that largel plans bile 964Some many yworker, and defined determined first employers are 9,869the and now contribution defined eb foremost xy sponsor panding 132 the 095flow contribution more toarrangements toprovide of401(k) than goods 16,973one salary plan retirement and plan allow services may 14.7 for be acti both older positions 1968 v oe plans workers. The system. co empl 22,339 mbined. onoyThe er public Therefore, plans needs In policy 12,224 thishav ae if case, proposals pr separate a ogram total the 10,115 defined trusts compensation that or make pr173,648 oand benefit policy vides separate approach recommendations. foplan r shofunding. is is rt-term 14.8 used, called The both EBRI a contributions. protection wages, under are From aaDC deductible the plan employee's isbusiness that perspective employers expense.do Unlike either not typically wages, type they o£ keep planare lifetime helps 1970 TheThe 15, Re3 v70 adoption enue123 Act 820 of of a14. pension 2197814,898 added plan106,442 does provisions not16.3 guarantee 30,268 to section that 230 262 benefits 401(k) iS.l of willthe be 1964 cost=of-living 6,581 adjustments 509 under 6,072 their5,127 plans because532of the prohibitive 4,595 10,667 cost Dec. 31, 1965 123 781 8,659 115 122 12,496 12.2 TABLES 1969 52.5 47.5 1971 20,888 144 708 16.9 16,441 122,883 15.4 37,329 267 591 16.2 reduction arrangements. plans, 1969 but also 26,346 because 13,824 of tradition 12,522 and the differential 199,994 treatment 15.1 of the 1965 7,495 512 6,983 Before6,037 the 524 5,513 12,496 Dec. 31. 1964 110 249 7,623 102 626 10,667 11.6 1972 26,510 171 228 18.3 19,295 142,178 15.7 45,815 313 406 17.1 1956-1966 1970 50.8 54.4 49.2 45.6 invested costs wand orkers. in benefits government must securities be considered. would be dependent on the willingness of "fl income, oo preferred does they reward r plan." can provide they long consume because must, service Itsinformation purp byover ofola employees. sewits ,time. is make portability tthat o While some makeThe will pro the upfirst vision any assist defined characteristics. private retireme forthose contribution the nt program pawho benefit ymentmust For was of accumulation deficiencies established benefits the makelong-term policy incan by Committee their 1970 historical employees. the might 30,268 earnings employee wish Thetorecords most to 15,370 explor purchase recent eonwhy which data an 14,898 theannuity available such UMIqfollowed awhich benefit 230,262 is provides from this increase 1979. course a guaranteed would In and 15.1 thatwhy be year based. the not treated as current income to the employee and income tax on that sufficientwould Dec. to 31,be support 1963involved. an 96 individual 541Surveys indicate 6 full .582 y during that 91 959no retirement. more than 10,2509 percent The defined 12.5 of Internal 197 provide 5 31,608 Revenue income !02 836 securit Codey 18.5 to in allow 23,867 retirement. so-called 166,045 "salary 16.8 From 55,475 the reduction" emplo 368 881 yer's plans17.7 perspecti to ve,be 1967-1974 1971 56.0 55.3 44.0 44.7 Table 1 Summary of Qualifications and Terminations Dec. 31, 1962 87 397 5,688 81 709 9,359 12.9 plan 1974 1971 Fle types x 30,00 ibility--Employee 2under 37,329 251 838 the tax14.8 20,888 and choice 2 regulatory 4,599regarding 190,644 16,441 code.whether 14.8 267,591 54,601 or not423to482participate 14.8 16.2 1966 10,124 603 9,521 8,059 607 7,452 16,973 United States House of Representatives 1975 10,769 Eec. 3245 1. 1607 9611939=1983 4.6 77 17 ii,162 9 201,806 4,829 5.9 7235 21,931 0 445 413 8,652 23 5.2 13.6 1975-1982stream1972 of income. 57.9 24.2 42.1 75.8 Plandecisions. Characteristics GENERAL DESIGN future in be stable the thein converted American primary defined Congresses employee, defined to Express benefit antoannuit oncappropriate Company othe ntributi plans yother at on in or retirement hand, 1875. plan. funds primary the By to Minimum most primary 19 defined honor 29, workers 397 benefit securities concern contribution private cannot objectives isorreadil likely plans toplans raise yto can estimate had be the be been an go the 59v1972 ernment percent event encouraged o£ of45,815 acti death ve or participants it. preretirement 26,520 were 19,295 termination. in more 313,406 thanMost oneplans planprovide provided 17.1for the by The most fundimportant earnings is reason, also however, deferredisuntil because theof employee the different actually funding benefit either helps approach in thedoes, orderlyhowever, recruiting allow , the maintenance employer the and abilit retirement y to design of thea established. plans do so. These If they plans are provided, are administered the initial bybenefit the employer, is generall buty reduced are 1967 11,292 602 10,690 9,229 705 8,524 19,214 1970 -4,180 DeC. 31 25,9 19 427 60 1.7b6/7 79 14,187 2 215,993 4,094 7.0 6310,007 698 455 4Z0 9,399 2.2 17.3 Committee on Post Office and Civil Service Table 2 Pension Plan Growth 24 1973 56.9 43.1 1983 33.9 66.1 1973 The (profit relati 55,475 sharing ve or desirabilit m31,608 oney y purchase) of 23,867 a has defined not be 368,881 ebenefit n common.versus Choicea17.7 has defined 1977 1,616 241 043 .7 17,985 253,978 8.3 19,601 475 021 4.3 1968 12,896 672 12,224 10,886 771 10,115 22,339 Table 31974Pension Plan 54.9Creation and Growth45.1 by Type of debt 1978 ceiling. 5,I03 I_eC. 31. 246 11 95 46 9 2.1 57 83 45,295 5 279,273 COVERAGE 3,536 19.4 54,50, 299398 525.419 6,792 10.6 14.2 metadequate established withToday certainty receives Ilevel will covering aunder of attempt cashbenefits this benefit. approximately to particular betoresponsive maintain I0 percent combined topreretirement theofmajor plan the nonagricultural issues appr earnings oach,raised but standards. in cost labor your their payment 1974 the Because been employer. As extent o ofIndividual you restricted early the 54,601 toare Federal which retirement aware, pensions to their 30,002 go decisions vernment and two preretirement - disability major generally regarding is24,599 types a maj defined oof benefits earnings r how empl pension 423,482 hea contribution oyer, vwill ilyas plans cowell. be to mparis exist participat replaced oin ns To approach 14.8 today e can receive until m inostthe the necessary workforce. to plan procedures balance which attempts used costs. in the toWhat meet twomany approaches. statedare retirement willing Theto DCincome do, planonby objectives. anature voluntary is always basis,fully is principally funded by the employee through a reduction in pay. Like thrift 1969 14,692 868 13,824 13,383 861 12,522 26,346 1979 12,488 Dec. 3258 1, 1958 654 5.1 50 535,548 69 512,821 3,062 12.0 4746.0 ,507 36 571 455 6,551 8.8 16.0 Hearing Related Plan tfor o the Years Devel1955 opmentto 1983 of a New Retirement System 25 for Source: EBRI tabulations 1975 from 49.1Table 4. 50.9 financially in savings or salary reduction plans. 1975 21,931 10,769 11,162 445,413 5.2 contribution plan depends a great deal on the goals the plan is supposed to 1970 16,512 Dec. 31. 1,142 1957 4315,370 615 2,16,062 659 40,956 1,164 6,074 14,898 17.4 30,268 Table 4Federal 1976Pension EmplPlan oyees 0 Growth Who are by Type Subjectofi00 Plan to Social Security force. For this reason, the Congress could theoretically fully fund the defined end This invitation ofwill theirmore letter career. likely of January In part, be 25, assured this 1984, isthrough the without result a duplicating defined of the benefit arithmetic whatplan. you involved have Most caoncillary 1980 ntr 1976 oThe Reports l The 14,55 first is-ben 1 lacking. with defined that 10,007 epriority 1fits, 73,186 the will emplo benefit employee E bemust ven 5. -4,180 ye Omade es be slight 41.511 making plan on usuall toestablishing pro 35deficiencies 14,187 this contributions, 4,332 vy idesmust Committee a13.3 clearl maee455,420 retirement t y i56,063 nand eligibilit by stated expected bearing 627,518 Hay/program Huggins retirement ybenefit the requirements, risk 9.8 2.2 for and leof vels income new the appr United funded, opriately o States. The Dalthough ec. 31,quality be1956These made a federally of pro tlabor-management o37 grams 1large 90 sponsored make private up 2,308plan two relations co "legs" rp might orati 34,882 onscan be of somewhat the be in enhanced retirement 4,assessing 944unique by economic the in 16. plan Sthis plans, Defined the employer contribution may provide plans a base matching contributions contribution. on predetermined These plans are fixed grant periodic benefit increases after retirement that take inflation into 1956-1983 26 1981 19,253 _9., 1977 439 7.0 48.2 8,842 403,174 13.8 91.8 68,095 695,613 10.9 a/ 1983 is for 9/30/83. 1977 Vesting--For Dec.19,601 31, 1955 defined benefit 1,616 31 943 plans,17,985 2,0 ten 05 year 475,021 2v9,938 esting has been 1,769_/common 4.3 6.3 meet. If everyone's goals coincided, then an ultimate plan design could be 1971 1981 22,493 23,146 315,585 1,605 7.9 20,888 47,054 450,22818,171 11.7 70,200 1,730765,813 16,441 i0.i 37,329 J_e 30, 1955 30 046 1,877 28,169 3,290 13.2 March 13, 1984 benefit program Table 51978 asCorporate well, without i0.i and Self-Employed actually affecting Pension 89.9 government Plan cash flow. under limits defined heard insince the converting The for before. prcreation passage contribution owhich fit You sharing are stocks ofof raised prescribed ERISA. plans plans to plan five flows. doaccelerated by can For primary notlaw. result defi have It nedquestions: Most automatic is induring contributio sharp plans also provisons nthe crequire the ost 1940s programs, increases result that toasofconvert under employees some auncertain result thethe of hires design. Congressional security 1978which Ipro poor have takes 50,398 "stool": vision Research investment drawn Social of inf retirement (1) o Service Security rmati 5,103 returns, employer on will income co frv o45,295 erage m and pensions report programs. areceiving into survey onconsideration. and 525,419 ofthis Pension the 659 (2) benefits maj survey structured programs or U.S. and of 10.6 empl are indi several good o vyers idual so 1983c formulas. regard. / 12,912To There 31grant 8,497 areretroactive several 4.1 25,218 tycredits pes 475,446of under defined 5.6 such 38,1 contribution 50a 80 plan 3,943 could plans. 5.0require A commona currently level generall the y '%ottest" related to growth years area of service for capital and a measure accumulation of salarywith toward a account. Surveys indicate that over two-thirds of sponsors have done this Jur,e 30, 1954 26 464 1,585 24,879 4,204 20.3 1972 28,265 1,745 26,520 21,070 1,775 19,295 45,815 1979 27.1 72.9 Qualifications Terminations and Net Plans vesting is generally provided after 2 or 3 years and full vesting arrived 1979 at easily. 46,036 There12,488 are several 33,548 players conce 571,455 rned about the design 8.8 of a J_,_e 30, 1953 22 069 1,394 20,675 3,657 21.5 1973 33,830 2,222 31,608 25,775 1,908 23,867 55,475 Created 1956-1983 27 1980 26.0 74.0 restrictions Yet, investment June funding 30,on 1952employee does returns. serve 18 289 cash This a purpose: wage includes 1,2increases 71 it individual makes 17,01during 8allretirement parties the 2,347war. focus accounts on Pensions 16the .0 defined projections accumulated The(i) benefit Institute Comparability of assets make-up the hasstock toextrapolated plan. anAnalysis annuity values which at these retirement. themselves numbers back The aretosubject more 1956 from typical to inflationary 1975cash-out data others. conducted work sa 1980 vin between a gs.specified At widespread byThese that 56,063 6Hewitt and length time complement 10Ass years. that you ociates of 14,552 will time employees Social in see before 1982. that Security 41,511 nowthey variations More expect qualify and than 627,518 them personal are 75 for tonot percent benefits. besasignificant. provided. vings_of assets. the9.8 Fortune As a tthe ycrushing pe This end isdesign profit ofcontribution employment process sharing. tenure. toshould Infund thesesuch The not plans, defined benefits. be allowed annual contribution Theto contributions DB be plan, plan made on , the difficult on areother the based other hand, by on retirement SOURCE: since IRS19income L7e3. ttersDue ofpurpose. Determinati to the omonthly n1982 and EBRI andbenefit tabulations. 1985 saw payinstallation ment approachofof401(k) defined plansbenefit by 1974 32,579 2,577 30,002 26,806 2,207 24,599 54,601 J_e 30, 1951 15 899 1_125 14,671 2,517_/ 20.7 1981 28.3 71.7 1981 68,095 19,253 48,842 695,613 10.9 new federal retirement plan who do not have coincidental goals. Therefore, J_ 30, 1950 13 899 ........ 1975 15,319 4,550 10,769 14,720 3,558 11,162 21,931 a/ Data for the year 1955 are cumulative. Prior to 1956, record keeping for Creal onclusion cost of a retirement 1982 program 33.0 and provides a basis 67.0 for comparisons. Such collected provisions and provided would market (2)allow by General aforces way in the theto these creation Design gothat increase vernment. plans areofnot an total Table are alwa unfunded compensation yoften s2 shows understood. liability criticized theexpenditures relative that because absolute could it without isbegrowth feared violation amortized bythe I001982 and Defined Defined Portability- o Defined 50 result, (IRAs) -percent Employees 70,200 benefit benefit and they benefit of Keogh progra are the plans 23,146 valuable plans mFortune employer shavecalculate no for rgen mall 500 in 47,054 the epensions y rally attracting are self-employed. require the included had -ultimate those 765,813 longer and theinretaining that ability this waiting benefit promise sample. employees. to periods based ai0.i carYou g ry ivenwill upon for considerations regarding the current CSRS: either proposals to expand or cut a very the hand, sponsor's large provides number profitabilit for of employers. yspecified . Generall contributions y, the size to an of the individuall emplo yyer's allocated payment plans, adjustments can be made easily, if resources are available. _efined benefits and defined contribution plans was not established. Data for J_ue 30,1983 1949 a/ 12,833.9 65 711 1266.1 _154 896 8.0 they1983 benefit needa/ to38,130 credits evaluate withthe 12,912 them relative when they merits 25,218 remain of the with 803,943 twothemajor same approaches employer 5.0 ifto see the year 1955 reflect pension plan growth beginning in 1955. The number of 1976 4,790 8,970 -4,180 21,130 6,943 14,187 10,007 J_e 30, 1948 11,742 484 11,258d/ 1,888 20.1 back comparisons defined the An benCSRS. eindividual fitwould and defined beretirement enhanced contributionifaccount plans Federal for (IRA) tho retirement se year issan is an individual programs estimate were pension required plan to that formulas. accumulated of (3) wage Examples Eligibility guidelines. funds of aresuch and often Plan Inflation formulas notgrowth used are: Protection for accelerated retirementfurther income security in 1948purposes. when the recei year investment over The inveThe and oaCreports several benefit o single Economic ngress the latter account. varying employer upon sh that point years. efficiency ould annual retirement include relates Without coplan nsider While percentage can to comparing data or with it ha obe w within third is the from itobtained impossible wishes the contribution difference grthis the owth actual the survey, from same rate to pri level between vate project fluctuating industry the of and ofgroup others, the sect DB benefits othe r entire if and nature tlikelihood and ofrom inpr DC the a o provided vide of your plan plans. of employees to the before plan isthey derived are from entitled a predetermined to benefits, formula, or vested, although than it defined may be Stock The bonus employer planswith are aanother definedform contribution of a definedplancontribution is likely to plan. have provided Stock Aug. 31, 1946 9,370 -- 9,370_/ 1,584 20.3 1977 6,953 5,337 1,616 28,463 10,478 17,985 19,601 based on the average of the percentage of pension plans that were either defined if amulti-employer consensus can be plan. attained on a general approach. In order to reach such IX-<. 31, 1944 7,786 -- 7,786_/ 5,839 300.0 benefit or defined contribution for the ten )'earperiod between 1956 and 1965. 1978 9,728 4,625 5,103 55,956 10,661 45,295 50,398 cmeet onsultant. ERISA Sept. funding I,SOURCE: 1942standards. IRS1,947 Disclosure Since theData; --program EBRIfor 1,tabulations. 947_/new hires 1,288 will be 195.0 a uni retirement National It future verse. is (4)benefit the inc Table Financing Labor ome conflicting Relations enhancements in3 reaching provides goBoard als coin gr nclusi of oawth defined different onew nsrates federal obargaining nsince plan workers, retirement design. 1956over employee forpension program, During eachgroups, major this plan thetype peri employer terms CSRS odofhas to contribution b/can SOURCE: InR oethe pre Flat be sents defined set IRS Benefit aplans. perDisclosure up centage contribution byPension: any dDefined ecrease worker Data; in $12 plan, defined cont EBRI regardless r aibution month binvestment etabulations. nefit plan perofplans growth. year employer performance of usually service pension directl pay (used provision. the y by affects vested 2 IRAs the For the employer pensions longerbearin term, duegtothe thelower Federal risk administrative of go poor vernment investmentshould costs, returns. seek the to ability Investment providetoall bonus decided to specific plans at permit the individuals emplo employers yer's under to discretion. contribute one plan Allocation shares or the other of of , company the the two emplo stock types yer's of to total plans a lump sum settlements to retired employees. The employee may purchase a 1979 15,755 3,267 12,488 41,122 7,574 33,548 46,036 DeC. 31, 1939 659 -- 659__./ 549 -- ?/ Represents a 9-month period, January i, 1983 to September 30, 1983. a consensus, Retirement someAges--The of the differences normal retirement in the age two retirement has generally plan approaches been 1980 18,849 4,297 14,552 50,493 8,982 41,511 56,063 level of benefits. Because contributions and interest accruals relate to start up program, this should be easy to accomplish. beDefined maintained a legalbenefit obligation aat / 9-month plans 65 years. for are period, employers. most Provision comm January on.for Characteristics l,retirement 1983 to atSeptember include: earlier ages 30, 1983. employees plan employee's in and are which while offered (5) percent public (a) with Table Coverage indi Federal by policy vthe to idual 4many 6most shows percent wgoals otypes rker soundly accou thethat n benefits of of trelative plans). financial designed bala makes nce are percentage selecting and ininstitutions, under funded full one split fire upon retirement type of including frdeath, oof m plan plan grprogram. growth oups termi commercial over nlike ati by the onThat ,year the other and NOTE: contribution a long gTotal integrate ainshistory plan may is plans based or figure ofmaygradual into not upon includes be the abenefit passed formula total the number onimprovements compensation to thatof the pension isretiree. usuall that package, yplans These have related dating and been include asbefore togranted a the can be compared from an equity perspective. In this regard Trowbridge plan.partially The indexed shares annuity are thenwhich allocated would torequire individual a reduction participantof the accounts, amount of S_XIRCE: Charles D. Spencer Associates for 1959 to 1975, EBRI tabulations of LgS data [or 1976 should be considered. has been December subject 31, 1939. to employer Yearly record and industry keeping for variations the numbertied of defined to to 1983. 1981 23,789 4,536 19,253 57,748 8,906 48,842 68,095 difficult. Protecting retirees against inflation is viewed as a desirable social Grace 1956particular toBy I Co1983. will mmission 1950, review worker Table pension and each 5oris participation (b)industry aissue summary privateineconomic turn, table whad orker but based circumstances. spread first benefits uponItoEBRI want 2 are 5extrapolations topercent being briefly carefully of review private fromwhy may retirement specific thrift or o o may 96 Career benefit means percent banking not or persons, mean Pay of disability. and oassuring Pension: finstitutions, changes employers defined the risk that in For contribution Defined the had an of employees mutual CSRS aadverse integrated defined benefit forplans funds, current market have benefit plans plan began life funds performance workers. the pension generally in insurance formula 1956. to augment plan. Since distribute is might companies, borne there Social be byare theand the the retroactively. initial multiemployer benefit. plans where several employers provide benefits emplo argues: yee's compensation. usually based on a percentage of annual compensation. Employee Stock 1982 28,189 5,043 23,146 57,162 10,108 47,054 70,200 Defineda/ benefit 9 n0nch peri(DB) od, Jplan anuary are 1, 1983often to Septembe prefe r rred 30, 1983 because they can provide 1983 a__/18,393 _/ Six =o 5,481 nth total 12,912 34,087 8,869 25,218 38,130 objective--that 1956 to 1983. may or may not be achievable. If the Federal government individual nonagricultural A second worker. difference workers Underand between theby defined 1959 DB and to 40 DC benefit percent. plans plan, is that Byonthey 1979, the are other participation structurally hand, the such vested scrutinized credit Disability--There o strong one 89 benefit through unions. percent against percent feelings asbased aThe criteria ofa sinis IRA on g the stream le benefits both generally permits employee's pension ofo£sides tax on lean velplan. efficienc final of provision indi earnings monthly that v yaverage idual A question, multiemployer and payments, up for topay--5 to benefit payment contribute theityears S deferred might ocial pension from equity--it or up best Security the less. to until plan plan be $2,000 seems isleft theper Multiple aemployers / 9-month ThatSecurity. Plan the sponsor period, emplo Sponsorship yretirement erJanuary contributes l, 1983 programs. to theSeptember same These percentage 30, purposes 1983. of should pay for provide every a A second major type of defined contribution plan is the money purchase OwnershipAssessing Plans (F_the SOPs),true Tax cost Reduction of a F Act ederal Stockretirement Ownershipprogram Plans that (TRASOPs), is fully _/ Increase £rom June 30. 1949 in the event of disability in coordination with separate disability retrospecti co ve vered credits employee whereas is a philosophical defined contribution strength of (DE) the plans defined are _/ 28 aonth period based on an average o£ 2,507 plans per year continues to provide full indexation, it should be explicitly costed in the individual had Only An grown one increasing very to in isapproximatel which: promised recently number ahave level y of 48 any percent of employers benefits majorof empl believe all related oyers private begun to that final nonagricultural terminating thesalary. most defined effective Adverse workers for especially emplo benchmark year different. another oincome yee wage 93 toreaches percent an imp insurance da base for account, oyrtant. . your n This plus ormal wereand work. 2and explicitly is percent retireme Social take important ntaof Security. personal integrated a such ge. because earnings federal withit inSocial income excess affectsSecurity. tax of deduction the the Social participants' equal to All contribution of these factors arrangement. tend to advantage The underlying both employers principle and ofemployees. equity is pension plan. Annual contributions to money purchase pension plans are andindexed Payroll-Based for comparison Employee to the Stock private Ownership sector demands Plans (PAYSOPs) a comparison are the based mostupon SOURCE: IRS Disclosure Data; F__RItabulations. prospectivthat e. individual This is especially workers enjothe y benefits case at the of equal time the value. plan is established RETIREMENT BENEFITS AS A HUMAN RESOURCES TOOL program. retirement Thisprogram can onlyis beone assured that COMPARABILITY if provides a uniform ANALYSIS bothfunding definedstandard benefitlike andERISA's defined benefit market and While o The Survivor over Security 6plans more percent performance distincti 68Benefits--All percent liberal in obase nsprovided order can of for eligibility between full to reduce each unreduced defined shift time public year the and entirely workers benefit bene value vesting and of fbetween its plan to pri of plans vdefined ate the requirements participation. atmust 25 pension age sect and contribution offer 55 or 64 with portfolio years empl aunder survivor 30 oFor yment years of plans. defined as age. a in canAthe understanding Private o retirement more and than attitudes oneincome employer programs toward is the required beg plan. an to tode Incontribute; velop the DB inplan the last the participants century. usually based on annual compensation. For example, sponsors may contribute comm common on stock funding bonus assumptions. plans. The contribution flows required by a pay as you a_/ 9-month period, January i, 1983 to September 30, 1983. benefit option with payment provided for in the event of death after * The views expressed herein are those of Mr. Salisbury and should not be is being used. number 3contributi can / Retirement See of be major James educated on plans, co inc H. rp oo me rati tSchulz omaking programs ounderstand ns, howe and maximum are ver, Thomas created that hause vetheir always D.of to help Leavitt, bene the relied fitsparticular meet will entirely Pension the ec replace ocost nomic on Integration: or defined asecurit benefit closely y contribution legitimately 3/ case age "Defined ser non-integrated of55vthe ice; or plans Benefit be earlier DC made--such plan. 16 percent serve plan if and However, the 1.5 distincti to Defined at worker percent make othe age ns Contrib has emplo 60; these perare retired uy35 year tion erfrequently percent plans has (used and more Plans: guaranteed at has by nage generous obegun 2t percent 62; An reco O drawing gnizable the ver and pro view," to viders benefit 39 22a by of inand The2/go attributed vThis ernment o is section pro tomaintained vEBRI, ided draws eits xplicit from Officers, under alegal paper oneTrustees, recognition prepared or moreSponsors byin collective EBRI 1921. staff or Staff. Since in bargainin 1982 that g time titled The private sector generally approaches planning on the basis of total go 10 tinder percent funding mostapproach of defined total will annual contribution becompensation very different plans, tothere the than plan. is for no A way funding lumpof sumof knowing distribution normal incost E--conomic _efined pension. Survival Benefit Defined in orRetirement: Defined contribution Contribution: Whichplans Pensionprovide Which Is forisfor You? Better vested (Washingto for account n, the DC: Civil C--oncepts,Issues and Proposals (Washington, DC: Employee Benefit Research voters. advantages needs of of the each. elderly. Employer sponsored programs have developed because acontribution ncillary has Institute, Servant? balances to percent percent adjust benefits profit to 1983) at ofgo contributions plans). age tha to for sharing na65. a defined named complete arrangements. beneficiary tobenefit make discussion upplafor nin s. the bad of Many integration. event investment empl of oyees death. performance. whose age and the Employee compensation estimated number Benefit of agplans reements; percentage assessments--all Research in operation o Institute, f theirhas cashgrown final 1982), and non-cash to earnings pp.over 3-34.800,000. benefits and that being the considered. pension in may be given of the final account balance. If an annuity is purchased, the advance plus amortization how much willof unfunded be in theliabilities. employee's account at retirement. The size 03 031 /0 07 7/1 84 84 03 05//0 03 03 0 03 03 7/ 7/ / /84 /0 07 /84 07 07 7/ //84 84 /84 84 003 o3 03 3/07 // / 03 07 03 o7 07 //84 /07 /84 / / 0? 84 84 /84 /84 03 03/03 03 /03 0 0 03 7 05 7 / ///07 07 //84 07 07 84 /07 / /84 84 //84 84 /84 03/07 03 03 /84 /07 /07 /84 /84 03/07/84 EMPLOYEE BENEFIT RESEARCH INSTITUTE 05/07/84 03/07/84 2121 K Street, N\V Suite _(n0 \Va_hington, DC 200_7 "lelephone (202) 659-0670 03/07/8_,.