viiivii vi ix iv iii V iiX 1 / 28 41 31 9ll 21 24 i 4O 5 8 7 23 l0 17 22 16 15 47 2 5O O 44 1 645 4 3S 46 27 259 49 3O 37 213 26 43 2S 19 33 14 18 36 Mr. Chairman, I am pleased to 54 appear 29 before you today to discuss the CO_E_S 32 calculations for the first time. It is indicative of the relative generosity nothingThe more actualthanestimation idle musingsof or taxEBRI random expenditures numbers. for To retirement seriously T-14 programs base any ispolicy quite beyond on plantheir formation control (e.g., and terminatio layoffs n. during Based a recessionary on Internalperiod). Revenue Service qualified defined benefit plans andandnetdefined growth contribution in defined benefit plans give plans all consistently parties concerned exceeded incorporated professionals, newly established plans would include relatively and union interest and social consciousness have contributed to the growth of L i SUMKkRY the that The incentive OtherRelative It the annual Foibles appears provisions to Merits levels establish and the Inconsistencies are of of the Defined acomplicated benefits. primary seconBenefit dary reason TABLE aplan Interviewers' na and may for 6toDefined require take the significantly advantage instructions Contribution special of administration the (some and Plans combi tr would aining ned say the treatment question contribution last computation on arose of actual the Another Even The There In this quarter in addition numbers questions whether the that are rates issue ofmethod of indication 1983 rate also case pensio that 1982 used toviolated the posed above Budget n was these traditional then are are CPI tothe trusts by generate and of the published not equity isa estimates the difference the provision yet below "tax anTABLE growth different differences as differences available appropriate either i the expenditure" in law. TABLE might inin in taxable the pri the its 4 benefit the The vand ate be between that Budget negotiated value TEFRA basis understood maximum 1981 1928 is pensions apply structures of ignored. each was DB or Reve for the was under 1982 contract nonly and ue since indexing perso year. is 7 percent. DC Budget In nsigned Act 's the inherent the plans that fact, dealing They pension ceteris lifetime permitted level estimates. Budget into that the The have inwith law Ci of v was not tax il multiple bei This the would Conceptual Though n Historically, number g played be relationship based. plans of ERISA Background by newly policy who The the established of qualified most had growing on advisors plan Retirement important contributed age prevalence defined who extensive anddo reason, Program beneficiary the not contribution ofmaximum minimum understand private Tax however, Expenditures under rates requirements, pension plans isthe one becomes because pension plans in contribution 1975 has employers particularly s ofwas ystem led theonly to employment 1975 rates implications in clearly THE1979, For LESSONS considered this perceptible example, 57,000 growth increased FROM of for ERISA means newly the consider growing estimating Tax to AND that tax Equity 4,550 TEFRA account thequalified cothese case ntinued and andbalance. ofFiscal tax in plans a pension expenditures. 661976, Responsibility year-old had A problem an 8,970 expansion average single defined Also that should Act man of many thebenefit thirty-six who reductions (TEFRA) workers resultreceived plans in of in provided of the This It pension isprovision to really pension systems differential isparticipants one would of marginal those not today. be thatFrom tax important makes rates thissense o ifover iscussion, the intime tax concept that expenditures I but give hopecanrise the were to 30 percent, then the contribution in period 1 results in reduced tax revenues A problem with the concept of tax expenditures is that the tax code does TABLE 3 of public ._.,and _ private plans to .,consider _ C_O tha "_t adding 0 the tax expenditures deliberation compli According cated. or ._to From decision some a purely pension on totally cconsultants onceptual unsubstantiated, > _ basis as many the .,_as tax but 30 expenditure clearly to 40 percent flawed estimates numbers of in qualifications and net defined contribution plan growth. Table 4 about federal retirement policy much to ponder. Neither the defined benefit few determi PACE participants. nation letters, In fact Table , many 4 shows ne_'pension the annual plans rates are ofincluding plan qualifications significant private pension provisions, rising from 549 at the end of 1939 to 746,000 SI_IARY OF (_IALIFICATIONSAND TERMINATIONS contribution limitations. The reduction of the Section 415 limits for expense astronomically) limitation defined Both Asbenefit they FEDERAL defined the could may Budget and higher REVENUE discourage not contribution defined make ofestimate the LOSS a pension c tax United ontribution ESTIMATES and deductible of States plan defined employer FOR plans creation Government contribution "TAX benefit give contributions EXPENDITURES" by allissome plans prepared parties of smaller are more and DUE concerned organized each pension TO than finns. year 40 trust reasonable co have employer Ser considered ontribution n vice September evolved cplan ontributions, deductions the limits. .._,3, because is 1982. structure alsoinBecause This they the largely excess of does a are cct_nulated pensions other of perceived funded not currently __mean, /3 ._ tax >on trust are differently ahowever, code pay-as-you-go acc wage-related funds ruing 0 provisions that and liabilities, by the certain basis. programs, workers. level that directional of If in affect some benefit these effect The two the Not their continue aprepared specifically TEFRA separation about significant obligations terminated. the ormarked only its contribution The higher one-half prodoes problems. v to ision well abstract in have cfrom that in rease Munnell before di than This rcomparison the ect considerable was service. resulted concept limits prior in average pattern Furthermore, any ig that aimed pension nore substantive year's because and with The of only this earnings has atflexibility tax participation. other edefined-benefit mlevel. reducing ployer completely TEFRA regul continued; expenditures part information a may provisions r is argued of account income perceived the inthroughout earnings it First plan determining that that extent on isfor significantly in to has 1982 as the creation of the the could a all, be ma of been her IRA precursor n Tax datory Social revised many recorded the utilization applied book be Fxtuity data. expansion plan exceeds Security deferred on retirement to tax and to 12 more idesign nprivate /private levels Fiscal rate the any Using of as a members participants; highe paribus have $8 result the different ,400 restimated is pe in of conditions in nsio in v funding this arious ncomparing Social ,participation in tax Committee calamities procedures 1980, there Security expenditures. themight are 69,000 relative rates used other benefits ingarner newly actual in auring values For differences the aqualified during better example, two this of operation, the approaches. 198 decade. perspective 2pla two consider inand nthe types s k_en averaged an two a additional of o The simple napproaches plan plans. pefifty-five DC nsio sponsors plan case n$8policy ,The 400 to where by ina 1982. estimated I asappear in thetoday hypothetical in my capacity example, as butResearch is criticall Director y important of the Employee given the of $500. I_len the contribution plus interest is taxed in period 2 it nets only The private pension system today is in turmoil. In large measure the not include a definition of the "normal structure" of the tax system. As the EMPLOYER CONTRIBUTIONS TO PRIVATE PENSION AND PROFIT SHARING FUNDS, attrihut NET able EXCLto USION public OF Number PENSION plans of ,eeee,CONTRIBUTIONS covering Number of a Nbout et Number AND 15EARNINGS perce Increase nt of PRESEN_FED in Nthe et U.S.INworkforce small demonstrates this instance plans may a are marked flawed bc terminated. shift because from thedefined Others estimation benefit expect procedure that to defined large does numbers notcontribution even of attempt may result in the implementation of undesirable policies. There is an and plans terminations as of Septembe betwee r 30, n 1982. 1956 and September 1982. Between 1956 and 1974 nor numbers the defi of ned workers. contributImposing ion structure new limits, is therefore perfect , to may meethit everyone's a broad goals. target Summary i Period Qualification Terminations of Plans Number of Plans Annual PENSION FUND ASSETS AND BENEFITS PAID BY THESE To the extent the firms stay small, not much pension coverage will be a set of "tax expenditure" SELECTED estimates FEDERAL A isBUDGETS developed by the Treasury assumptions allowing argue implica inter disbursements multiple about retirement retirement earnings defined estimates. view; Mr.federal t that ions benefit fu Chairman, pla is nused ding one- plans. plans nthat They can wage stretirement ime may from n tois of ot had have federal calculate indexation also stated Without past be Iincome met these am not hypotheized. encourage pleased their servi poli in considered inferring civilian plans. is c cthe eflow y would normal to pension tomu terms credits. the be appear cBefore The hwho and the be cost ig to while reduction tax actually n more ored. time state life before contribution u ponder. The expenditures ndertaki the series appropriate. cycle 1928 and U you defined bears nof less nReve g Neither today some local structure such date plus n defined-contribution ue inthe existing contribution the to on In pension the Act aincidence n the any these discuss exercise, 1984 40 allowed of defined event, plans, year plans Budget. pension earnings of is annua the the it were , l pensions aspects. private was pensions percent perceived pension pe provision integration nature changes. 1977 actual nsioavailable. Eve Table nas nmethod is pension provision of but the considering contribution. For for 4With always was accrual the shows she in reference some example of profit other the system But also an calculation. fully net years ,that essential by of publication contribution fails sharing growth pri the has year, the funded. v a now, ate arise In stabilization time cto been apital because of part the and explain Itplans To because the 51,600 refle has of other a limitation of grant c stock c tual 1984 ted no_ the it the her can tax-qualified _ other of defined retroactive Budget in company's been corresponds be conclusion estimates by 1984 pension the to defined the things applied federal was contribution defined the steady participation pension prepare6 second credits are plans contribution of that with budget contribution to growth not tax the program during plan. state the always there plans. under higher expenditures there inERISA rates and This or the was the such and equal. is defined plan tax local data, number evidence during 140 new three that arate and for the issues Benefit projected participants; Responsibility pension person's inbenefits. Research general, life CORPORATE planaAct ndis termination and in Institute. made Assume of AND 1981, 198 the up 2 SELF-E potential there should of roughly only trends bEBRI IPLOYED was reduce two is no 82,500 implications suggested a PENSION periods. other nonprofit the npension ew income PLAN in plans During of the organization QUALIFIC TEFRA contributions averaged twenty received thein ATIONS years particular. first forty-three dedicated and and preceding period no accruais special tothe warned of potential problems during the TEFRA deliberations their concerns $530 inEnding tax revenues. Ruling Discounting s to Date to the Dateperiod in Effect 2 taxes Over Prevback ious Period to period Growth 1 to 1983 plan Budget creationpointsdata out,of thethe termlast itself two to is three"unfortunate years indicated in that that it it seems bad to PLANS FOR SELECTED YEARS can increase the tax expenditure STATEt,'_NT estimateON by more than two thirds. defined to accountbenefit for plans the significant may be terminated difference and in tax replaced collections with defined on current impression plans since in 1976. the pensi Although on communit the y desirability today, however, of this that shift these tax has expe not nditure been -- there not was just steady a few high-income growth in professionals. newly created defined benefit and defined It Historica]ly, is the conflicting the growing goals of preva different lence ofworkers, private employee pension plans groups, hasemployer led to Introduction 1 however. foregone. is indi impli benefit included cworthwhile ators catio Sept. ns nor 30,in are If 1982 of to the the the shown 5_show /firms the defined tax 884,936 inthat Tax Table expand, expenditure pension Fztuity contribution 3. the 144,963 and Aspolicy delay calculations in Fiscal the cha stru in 745,973 cn Responsibility establishing ture ges casefor matter. of isthe the 56,693 perfe a number first plan c A t ct of time. can (TEFRA) to plans 8.2 mean meetIt and of is continued freezing program available These federal a amorti benefit Department stock. zation arise accruals costs, ci provision cv ontribution suggesting ilian and partly schedule published most and plans because ofstipulated that of marginal limits pethese n as sions 1982 as of well. will programs the part IRA in tax for inherent utilization reduce ERISA of Some rates "some in thethe the for might Budget. differences that orprivate income private infind provide all" response The replacement sector plans it of "tax in intriguing atheradically the established are expenditure" anployees to two capacity ERTA largely types that different of jumped before athe Iassumptions Budget benefit. THE of nconsistencies pensions plan years percent universe ERISA's raises the plan evidence for retirement parti GROhTH The 1970s, some lump-sum could 1975 cipants the or early impl_entation. In that were of OF the _nployee's progral_ to 1.4 indi require used both PRIVATE vprivate distributions indications 1977 the iduals in limit result outside instances and IRA pension in compared the TER awas PENSIONS benefi and of consciousness defined-benefit the crushing b forego the lINATIONS in the reduced c Pension are system 1982 iaries benefit ERISA realm n are to the ehistorical that Budget 54,600 contribution co revenues AND of high to n Tax may had verted many FISCAL le ascollective of 1.25 v NET els Expenditure plans programs estimate shown an marginal the again growth plans PLAN by to YEAR are generally value even TEFRA. in to in an become will INCREASES estimated in 1974. are fund grew Table abargaining. nn greater tax Estimates private of uity, be "therefore a such by rise 2.The modified accumulating brackets. target 1 o218,487 /n benefits. Se they average effect pension c w the ond, ithof more The basis never increases to the plans and on annual Finally assets. 1948 realistic." plans budget reduce The of perhaps show defined , DB one in plan NI]{B in up isset the the providing participants. person deductions Table works, research S,considered based earns While and onincome analysis some tabulations for and calculating individuals pays which ofincome info can tax or rmation serve small taxes. liability.as professional thataAssume basis plan This sponsors for person that groups sound this would filed policy may person's have with were largely unheard. The Washington Post recently ran an interesting account Th re ecovered Gro_'th for offrom the Private the time P initial ensions price of shoc money k ofmeans ERISA. that the The value economiof cs taxes of high 2to be imply that Government has control over all resources. °e'-t If revenues which are D_c. 31, 1981 816,924 133,644 689,280 68,095 11.0 The Special 1980 Analysis G 1981 in the Federal 1982 Budget1983 does not include 1984 separate estimates contribution benefits played paid plans. anda central the time If role this discounted inis the theconsideration value desirable of future outcome oftax of TEFRA. colle public ctions Furthermore, pension based on widely discussed, elements of TEFRA may further increase the prevalence of a marked TEFRA Dec. 31, has increase 1980extended 741,387 in to pension the "payor" 120,202 participation. or 626,185 the plan Outside administrator $6,063 agriculture,of 9.9 pension 68.3 and contribution public policy plans.goals In that each makes of these it impossible nineteen to select years, one qualified type of pla plann Pension Gro_'th and Sensitivity to Public Policy 10 substantial losses in ultimate retir_ent security for significant numbers indicative of the _N relative generosity ...... of public and private plans to consider 1982. concept I was appear first today laid out in my in c 1967 apacity by as Stanley Research S. Director Surrey, of the the Deputy Employee sponsori The of militar on supported The of everyone's the the ruling, 1974, distribution indi pension ERISA the accumulated number contribution It yThe ng viduals the is based survey retirement Special Experience easy employer, of by goals. total programs of parti employer on to as athe n c rates value employer d ipants, make the A retirement It n program which tax alysis the 1947 over a on isof expenditures contributions. case tax incomes contribution Labor the allowed G the istime. the cprogram in ollections that still confli the asset Relatio aggregate (in insome cow ting Federal The not excess than millions) benefits. nto ers n is high-income TEFRA s on included From these naive Ma pension pension also of and Budget n goals agement freeze the the two cross much As offi inemployee's Social does c a finan workeres of benefits plans ers the more would result, Act, sectional cial different not 1984 Security would toheld portable affe include are are establish data the Budget cperspective thave that analyses. receiving estimated traditional workers, a indicate taxable than small been pensions separate estimates plans a $89.2 on They a a There employee's more significantIy of growth process. previous contribution that recommendation plans TEF important, an is ,Rrates A cert increasing twenty but further wages aduring iover also nplan l parti yyears; of and no cprior because share adjusted ipation terminations. the athe length priori 32.0 National of years. implementation ofof the the percent has re service. tradition aFor so Commission grown work Section In n example to 1973, of force more of believe and Though this ,ERISA 415 1,908 on is the rapidly EBRI growth Social participating that some limits were defined differential released pri anless Security occurred over vy for ateset contribution than defined the the of employer in treatment between data Reform aone-third at ssumptio years benefit least in plans 1973 Table plans of to than none stheiand tax n9 have toward adjusted employer plan,The The on incorporated employee stock expansio gross the establishes other and income n benefits. flow of hand, to the take a ofdifferentials pensio $8 would role ,advantage 400 Prior nof allow plan under pensions to joining of in during thecurrent existing the creation in two the EBRI law. the plan first Section of I U.S. He an types served period would unfunded 415 retirement can and limits, as be makes be eligible liability the easily many income Deputy a $I000 for a collected story the IRSinon (fotr his the m 5S00) contribution regard in on compliance the will Federal only withGovernme beERISA $300. nt's forSince the experience 1977 $500 plan is with foregone year its , indicates o_ in the inflation during the latter 1970s and the extended recession of the early not collected due _'-_ to 'special' tax provisions represent c_ Government The FRISA Experience 11 Dec. 31 1979 672,045 106,923 565122 46,036 8.9 EMPLOYER TRUST FUND BENEFITS estimates of the tax THEexpenditures EFFECT ON PRIVATE that PENSION are attributable PLANS OF to IRAs. The IRA the policy current recent it contributions has t_precipitous ')0never .......been under changes openly thesediscussed in plans. these _ rj'_estimates _in Fromthe a Congressional more 0 are _-_ practi seencal as forum. an policy ominous analysis sign defined contribution over defined benefit plans. over establishment the other as exceeded being ideal. terminations But everyone by more should thaunderstand n a ten-to-o that ne there ratio.are percent and deferred of all compensation civilian wage plans or thesalary obligation workers of between tax withholding the ages on of The Relative Merits of Defined Benefit ano Definea Dec. 31 1978 _ _ L_ I=615,168 L_ _ _= 96,084_-_ • _ 519 086 _C= 0 50,398 10.8 of workers. YEAR CONTRIBUTIONS ASSETS PAID Be substantial THE that Assistant nefitEFFECT adding Resear OF Secretary the tax chPENSIONS tax deferrals Institute. expenditures for ON THE Tax under BUDGET EBRI Policy attributable pre-TEFRA is aatnonprofit Treasury rules. to public orga from Clearly, nization plans 1961 tocovering adedi n1969. yone cated now about He to 15 estimates more uThe number survey vested in strong either rate contribution billion have employee nderamost realistic news for totally type histori defined whi ofsignificant of groups, estimates during the c release h cc urrent the of alyears inthan they ignored plan benefit tax behalf fiscal employer on growth pension immediately expenditures of helps another received pe February promise. nof the sion pension 1981. pattern. pro and the parti inconsistencies vwithout legislation 3ide c public worker. prefere 17 ipants. ,prior / that 1983. The receipt income This ntial poli individually to an are Assume is c This the ysecurity analytical As and in 48.5 attributable passage goals tax information the inthe further benefit percent the general treatment history assigned in thatof basis actual retirement. makes ERISA. that levels more to of was on level assets calculation while private which itthis IRAs. picked This than significantly impossible ofFrom cto contributio excluding an slow-down plans up wages the The evaluate the of quickly be total these IRA in n 1981 are private maximum. plans were the terminated, of reconciled 1977 annum double totally contributory tax Budget plan negotiable. and Dec. tan where expenditures sector ts. exemption 31 types differe 72.7 This by 1977 benefits this n actuaries PENSION percent employment. tunder Defined most $ pro increased The 12,925 since vision set 549,484 for are the commence PROVISIONS NI]{B between Benefit of tax noncontributory. and e_lployer hebased to individuals. $ does Private and was 3,558 14,740 economists. 1968 Plans prior IN reguiatory over 80 not its ,sponsored 796 and TH_ in sector age seem to 1975, 1977. ruling TAX This age 65 468686 employment Additionally code. EQUITY For toand retirement and pro 62. If Defined recognize on cedure so the all AND Under 6,775 two his , individual 28,169 grew FISCAL Contribution 19,601 programs. would pri taxable TEFRA in the n each 15.4 ciples: tax 1976. upwardly substantial the qualified worker _nployer income percThe defined ent 4.4 Plans More (i) would bias estimate the from can that than plans the be pension new Social a that clea pension could r program Security relationhsip be plans amortized other benefits are tha between including n overSocial that seplan veral significant Security. was age years. and implemented numbe While beneficia The May rs r ities of 1979 in wo is r the Current kers. impossible in Social defined Imposing Population -benefit Security to security Director Contribution syste of m the can be Plans Office traced ofthrough Policy the Analysis growth in in the the nt_nber Social of Security pension 16 current 1980s have periodcaused and the problems future taxes that have are only been _orth largely $300 handled. , the cost Thetosho tile ck public of 'expenditures,' why not consider all tax rates below 100% 'special,' in which _, _ _- _l _ d Dec. 51 1976 514,008 64,981 449 087 3,494 0.8 THE LESSONS FROM ERISA AND TEFRA Net Total related tax expendituresRESPONSIBILITY are imbedded ACTin OFa1982 broader category of retirement The perspe Relative ctive, Merits the ofestimates Defined Benefit are further and Defined flawedContribution because of Plansthe totally 1982 that Budget additional pension 19,785 reform 23,605 is high on$ 27,905 someone's legislative agenda. pensions Consistently, , annuities there was and deferred greater compensation net growth in payments. the number The of defined Act allows benefit the good twenty-five reasons afor nd an sixty-four, d against working both pla atn least types. half That, time, more who had thanbeen any other with _,_=.-.I.,-4 _ _ .,-4 The Potentia] _ o..Implicatio c_ _ ns of TEFRA u _:_ 21 Dec. 31 -_ 1975 485,944 40,551 .,= 445.593 21,931 5.2 stated: rank-and-file workers. (dollar amounts in billions) providing underestimate One There particular has researbeen c the h effectiveness a some ndprobl_ analysis concern with in of which the recent top pri ca v heavy n ate years serve pension provisions about as a the basis systan distribution could for in sound thebe deli poli of the very cy the related them. 1950 this in redistributive benefitting liquidated employer's rises, percent to estimates sele both The tocountry cSuch t,tax however, 1959, of relati the one perspective and the to expenditures analysis from vhas e27.0 say type trade reinvested U.S. characteristics the been the nothing per desirability of portion workforce cent .4 press was the pla either supplemental n are Employee in of from not over of and an the helps can imbedded available the 1960 individual the of of the significant increase work Retirement Social in other to conventional alimit the 1969 force defined into as Security. orderly will retirement the compare ana a being I affected methodologica] ntax broader come have 26.8 benefit media. recruiting, expenditure the ideal. Nor this percent Security account, category would 1981 does versus preferential This But and it from difficiencies maintenance making inestimate Act. cof a includes rease recognize 1982 everyone defined retirement 1970 Budgets. them As tax ifbythe to such more in 1983 establish pe in benefit i0,000 does estimated employer innpension sio existence Budget During include nsdefined an that contribution fell tax plan Plans indi tile some at expenditure v can idual growth under the contribution last amount be end Plans going plan during the two funded of attributed ,for1955 term years use to 23,390 the two Net plans is were "wages" aall mid-1970s reaso preapproved Plans there actuarially toassumed nwere private s. military 25,765 ashave terminated contributed Plans defined toplans been master be disability reduced $defined-benefit 27,500 in significant in in the plan to Plans each to 1981 a benefits law;, slower of $75 orshown changes ,000 and the Net join plans, growth --next in (2) Plans but other for Table in that which two in they3Plans Administration. stock Survey would project new $6 legislation ,400. limits, Dec.concept (CPS) have the 51 Schedule 1974 passed been likelihood therefore, promay vides paid Prior X by of 455,905 beto the 1982 of to Congress ma more the future most that yFederal worker hit easily recent I will benefit 32,243 was aas Income the broad raise available understood wages enbancanents Deputy 423marginal Tax 66 ta if 2rget Tables it statistics Research had during tax --atindicate not 54,781 not rates thebeen the Director on just inception recent for period acon tax many 14.8 tributed a pension of liability few of of elderly the to programs, plans. The Defined their OPM participan benefit says plans that ts anma d cove nbe y" rneficiaries. retirees two-thirds appare ofThe p nr tly ivate implicatio plan didn't panrsticipants of theseand fisc TEFRA , or istile being tax applied expenditure 4-J .,-'4 to , a system is $200.that has been buffetted for most of the case all C_l resources are effectively Government-controlled?" _ c_ 0 _ 0 11/ As a result the Lr) _ O0 1-_ I',_ C_,--t 'm:t- P_ "plans Dec.for 31 self-employed 1975 396,520 and others." 27,639 368One 881 might have 55,475 expected 17.7significant unexplained The The historical private variations pension response insystem estimates of today the from pension is in yearturmoil. system to year. In to large tax measure and regulatory the 1984 Budget 45,280 49,700 $ 56,560 reason, individual Both umay ndestand defined recipient account the contribution for tonew elect-out the withholding factand of that withholding. defined system. most large benefit Some,employers At OPM plans leastsays, once iare n the a organized year United the Year plans oveQualified r the number Terminated of defin Created ed contributio Qualifieo n plans. Terminated During 1974 Created the net CreateO their employer _'_ N for _1-_ a year or more, were "_ 0.,._ participating in a pension plan o _ittq_elding Provisions 25 Dec. 31 1972 336,915 23,509 313 406 45,815 17.1 than two thirds. This element of the revised tax expenditure estimate can be r..) _) the toward potential of the should treatment benefits. TEFRA low _mployee rates understand freeze forofof benefits. For firms their is return example, extended. thatto contributions thatthere wander the indi As vare iduals March more ingood to people and 1980 will reasons secondary out CPS reach recei of provides for ve top-heavy the and plans on limits, an against their status. estima reduced. the te both combined inof It cplan ome The $18.8 is There 1979. earlier and pension benefits of earlier. the $592. Also The retirement calculation is Over analysis participation also pro first atIn vthe ided aother thatlack of same is procedure. pointed by the time words, of that three private necessary rates analysis pensio cout, urrent periods nthan only sector trusts by workforce. explaining would workers one-fifth pension plans. the were have mid will parti revo The occurred even 1970s ($18.2 cipation have cable. analysis greater private higher otherwise. billion) That in of discrepancies creal reased pension these is,of earnings benefits afunds by the sponsor between employer 85.7, held levels is "plans finns pensions make highly contribution newspapers retirement years. federal up in for portable. tax only acould as at self-employed laws multi_nployer plan USA age aboutbe affecting This Today 55. depends 9considered percent TEFR combined and and Aemployer The a plan. great also of Washington others." perception "other the As allows deal sponsored military long conditions onTable Post. for the ofas and retirement goals incremental a8 Table plan individually of definable shows employment," thedesign 9 program. plan the shows adjustments asset, tax isestablished features supposed expenditure which The that along military the to are were IRA programs participation high any accumulation, the is certainly -income pension new pension on prnot pla the ofessionals. levels. hut plan_ n.the public itcase, Furthe pri3 v is /atefisc r62.7 more, the This defined percent can flow survey for bebenefit simplicity, of ,traced of all income based plans by defined-benefit considering on assume that havea sample a isthe long important the worker's pl of history apattern ns households would marginal in of of have Universal pension an even put recipients. Social large down r Security segment the Higher amounof tCoverage marginal they the public wanteci Study, tax plan rates aeducted am_nbers. among study for pension the mandated Among entire recipients other by things, Congress. should form last Dec. ten 3years. 1 1971 The 287,580 system has been 19,989 extremely 267 591 resilient 37,329 until now 16.2 and may Methodological practical definitions Problems in that Estimating have arisen Retirement in the Program measurement Tax Expenditures of annual tax o Social Security Integration 26 1950 $ 1.7 $ 12.0 0.4 increases Through in the tax deliberate expenditure departures estimates fromafter accepted 1982 concepts because of of the passage of planThe creation Dec. 1981 31 1970 Budget data of estimate 246,916the last of this 16,654 twoparti tocular three 230 262years tax expenditure inclicated 30,268 that for 15.1it fiscalhad year provisions SOURCES: Special is fairlyAnalysis well documented. G of the Budget The of pension the United syste_nStates is clearly Government sensitivefor payor total during retirement has 1979. of plans. to defined notify From benethe fit tile beneficiary employee's plans incre perspe of asedchis tive orby her either 30,000, righttypeto while ofchange plan defi helps their ned States today year. have Butboth that a amou defined nt isbenefit being and takendefined out each contribution month, plan for 1955 o oo Top Heavy Provisions 0 c_ 0 U _ 27 certain that net income some firms an_ that through are notvarious top heavy special could exemptions be driven , into such billions better TEFRAunderstood ofcontains dollars in by theassets. looking most at signifi A few, recent canthighly annual changes publicized contributions for cases employer-sponsored toof pension inadquate trusts estimates the could often contributions hillion with contribution over types. important 1983 Another The Until their establish based relative a in defined That, n for dissue, private lifetime the facet this on 1984 that during more portability Treasury abenefit survey however, plan broader would of B than pension ufiscal dgets. the than inany plan be Department ERISA data acategory is may chigh-in urrent 1982 required other benefits provides whether Tsets combine hexperience echad ome estim from reason, is be to su secondary n aaof c eficiaries. ted paid to h willing year, have clearly the private ais c as count during may fiscal been the make lastplans the stated tonotable aplans c at count for Current 1979. 1982 tax-free four spell least Itwill is typically t is retirement a Federal shift for x The considered $ Population this out 2be expendit 3 contributions the data billion. toward phenomenon termi in Budgets. fa uc re in shorter t income detail in n Table Surveys defined that ated dthe u In eto One that the 3 ttax the o 39.0 n benefits been to repla retirement retirement egotiahle, cAssume meet. Some ement and less and Fiscal that 36.8 analysts as program If cprograms. will than apacity k'ben an are perYears everyone's calternative, ent. be ten the taken paid have uof nt years company 1981-1984 il after $13.7 The Some pensions contended the goals oldEconomic age appealed that retiree have billion at(Washington, coincided 65. the would this focused that Recovery "correc end the ,man in diminish. of the benefits ruling, ts" had then D.C.: 1977. on plan Tax not an the it.terminations the Office ultimate during The enjoyed Act This, stabilization Seve defined-benefit (ERTA) of fiscal n the cth ombined Management planthat Circuit double 1981 ofdesign occurred of with 1981 and Court pension and thethus nondiscriminatory While employer-employee gradual representing reduce retirement. tax Give rate the the nbenefit that views pension ,isAthe pers 50 the impro that percent. employers oU.S. payroll tax n's v_lents, 1.4 I expenditures express standard civilian limits can ta That x often here provide ifis, were ofthey work under retroactively. are for living more r are based educed each the force, atliberal current additional is on ortolargely several abo 1.25 estimated vcoverage e estimation and the determined dollar years , not taxable participation completely that of of methodology. earni by income research outside the ngs the growth survive 55001955 of requires TEFRA employer relatively repoco rting ntributio unscathed. the 3.4 "effective ns to pensio Then plan n again, trusts date" 27.4 itan or may d date the not.be the nefits plan 0.9 paio was setbyup. The world is not quite as neat as this simple example ._ , (D however 0 ,--_ r.J, and 0 thus, expenditures oDec.Self 31, 1969 Fanployed are not 21 and 4,342 al_'ays Personalcon 14,348 sis Service tent _ithin 199,994 or across 26,346categories, 15.2 or from 1956 3,175 192 2,983 2,072 111 1,901 4,944 recovered ERTA. Yetdeductions from this tax theexpenditure and initial credits,shock has ourincreased of tax ERISA. systemvery does The little. operate economics Buttobyofthehigh time the their 1981 was workers. $14.7 •,_billion. 4-) _ 0 .-._The _ _ _. 198 -_=-2 _ _ BY _Budget _,.-_,-_ _, estimated --_ _ the ._,-C:,--] 1981_ fisc _al :'-_ year tax s ta tus. and PENSION responsi Dec.GROWTH v 31, Budget). e 1968toAND policy THE 186,267 SENSITIVITY change. 12,619 This TO PUBLIC means173,648 that POLICY pension 22,339 policy must 14.8 be steady provide income security in retirement. From the _nployer's perspective contribution plans registered gro_'th of 24,600 units. ERISA was signed into Corporation Plans 28 1957 3,527 180 3,347 2,898 171 2,727 6,074 in the 1960various sectors. 4.9 52.0 1.7 Dec. 31, 1967 162,485 11,176 151,309 19,214 14.5 from status retirc_nent thebyaffect plans Nation conditions alsin the ce Income private the beyond passage Accounts economy theirof ERISA in es ctontrol imates ways in 1974. that pri (e.g., vate areThe pla layoffs usually n changes benefits during inin TEFRA a 1979 might net the these most funding, development c So could when level vesting expanded raises expenditure derivation onducted cial exclusion plan, have this trusts. generally be large Security's the arrived inthe expected poor by measure and aof n real estimates DC d of the employers availability the nunerical administration related employer revoke plans. Census level at redistributive is significant 1985 impl_mmnted. easily. when of in it Bureau. to Budget pension basis For the inyears Social of an the ,United the and There unprofitable Individual of increases While nature contributions Tresury of theSecurity If service highly these occasio 1981 States are seco these means Depar_nent always tax ndary estimates mobile in nand Retirement al surveys and today year. an expenditure the and plans aseveral ever embezzlement measure pen worker, have estimates sion ta trust The are increasing xwill they Accounts expenditure players for extremely of both 1938 benefits should fund be salary private the these received terminated, a Revenue share concerned (IRAs) earnings be defined defined valuable, toward for estimates alike treated plans of to federal wide Acwas twas for as parti maximum contribution of is cipation Appeals Lowering the second and plans. fou rate Section expect n largest dduring that The to 415 pension the PBGC the retire econtribution m 1970s ployer studies plan after as in had ancited the thereasonably indimid c limits United ation above 1990s.States, argued that will indicate The thethat reduce behind private differential there pensions pension was the pension were some Civil and and agric eliminated system after worker's ex_nption flowvesting analysis The The u oflt the in u goods differences re, assignment tax passage this privileges for the sponsored 68.3 liability and country likelihood being services of percent inERISA than of by funding today over would various ofwere pens those that they all age ispro ion increase mainly can still ma civilian specified vprivate isions 65 ny consume contributions orquite plans the the by and wage and desirable by will nontaxability young. over 50 public ERISA. the or cents. be time. salary tax across te organizations, As relimination code minated Finally, _]lile the workers may of indi system vthe iduals Social pro isassume vpbetween ide rmatures, defined of obabl theybad Security that the yinare the or the the the It also Others, requires OPM the said number yester of oay, active putpardo_ ticipants a dollarin amount the plan, to and the number the actual Just because estimation a policy of tax shift expenditures might result for inretir_nent significant pro adjustments grams is in quite year to ye c_ ar. ._._.- L_ _ _t _ '_" .'._ _ .,_ 1958 Dec. 31, 3,883 1966 141,964 224 3,659 9,869 132,095 3,071 16,973 179 14.7 2,892 6,551 THE 1984POTENTIAL Budget oO accomplished _as IMPLIC _ prepared _ _ ATIONS 0 by t expenditures hOF ereTEFRA was evidence -- in available effect to U suggesting _Ic_ produce 0 _ _an_that o_._ 1982 IRA either inflation expenditure helpsduring for in the the theorderly identi latter SYLVESTER cal re1970s c cruiting, ategory J.and SCHIEBER, the ofmaintenan extended plans Ph.D.* ce atrecession and $23.0 retirement billion of the early of -- the a 60 inconsistency and even handed Table if the6 shows pension thesystem tax expenditure is to be estimates stable. due Erraticto polic the y tax or be withheld monthly, unaware that that amount would be law This The on 1965 Dec. Lpurpose aprovision bor 31, 1965 Dayof in isthis 1974 123,781 oneheari and of 7.6n was those g largely is 8,659 thatto makes assess implemented 115,122sense 86.5 the implications induring concept 12,496 1975 butand of12.2 can TEFRA 3.5 1976. resultfor The Lessons from FRISA and TEFRA 29 1959 3,824 270 3,554 3,442 204 3,238 6,792 Table 7 includes recent annual contributions to privately sponsored will Benefit recess affe ionary ctand expenditure defined both period). the contribution system substantive described plan elements fo in r tax their language. ofworkers. plans as well as their 75.7 modified publicity. estimated were c the they the include then nothing ontribution end percent $27.5 elderly Dec. are policymakers workers of more the 31, at subje billion employment 1964 To revocability higher _c than 2 would t3.4 plan remedy already to idle billion or be in must 110 limitations may more these tenure. ,249 unable the musings ask covered provisions than be (see 1984 problems to whether The preferred or Table 45 Budget maintain that 7,623 random perce by defined and warrant 2and the n )a than t on pension numbers. required preretirement because to 102,626 added more contribution contributions inicn are the crease tha plan. tax nthat in 1983 To ofthe pension revenues seriously their 10,667 aplan, Budget. The living CPS its retirement of Tax $60. estimate. participant interpretation. on portability 2Equity are base standards The the billion 11.6trust projected other worth anyand policy and be (see between system about contribution direct not Ser pl contributions su ratio a cc ns. vWhile eeding icewages the of shifting the has added workers Retir_nent If ERISA but design 1982 cohorts stagnated. theand rates that toand with estimates has to the of benefits premiums of 1983 of beneficiaries adefined System. amount had retirees. retirement 1.3 Budgets, EBRI's of many percent were relative tobenefit taxIn be ramifications As clearly previous expenditures in many plan dedu will in aparticular, plans to cresult, ted who regards salary 1984 markedly included do based research being between not are for for the the because have the decline, in osome military terminated margi n to has the private the n coincidental pre be al highly identified "other number of much consistent, plan or taxand pension the compensated post-TEFRA as conditions rates replaced isthe the passage goals. system the that ratio then rapidmost by will of of the of my benefits. ages slight. Treasury's contribution financially time _nployer Pe own of nprice sio twenty-five and The n theTax These programs complete accumulation unsound of incenti do ModeI money two not ve and provisions plans. has have elimination represent sixty-fo or to can not pro been rate Some vide u of be been r, of the publicly of the working more unscrupulous converted return the publicly official taxgenerous taxbetween law regulated, at incentive are least to described position sponsors benefits an considered the half annuity ito two n of making oand set time, nunder etime EBRI at way bad up to periods retirement itwho or secondar be aor plans difficult defined any "exemptions ahad nother, y other Been were is to i0 of the beneficia pension ries system be r does eported. not mean The that age of it should the planbe can judged be calculated bad policy, from the complicated. First, Treasury estimates the foregone taxes from exempting Tt_efin Effeexample ct of Pensions of this is on the the Department Budget of Treasury's estimates of the 30 reventie 1960 5,011 300 4,711 4,946 258 4,688 9,399 1970 Dec. 31, 1963 98,541 13.0 6,582 91,959 138.2 10,250 12.57.4 c_ _o _._ _L_ m ._-_ utilization in response to ERTA jumped significantly _ U over prior years. ne 1980s per cessary cent have inc workfor rease. caused ce. problems There was that absolutely have been no explanation largely handled. in the The Budget shock doof cuments treatment frequent adjustments of employer willsponsored tend to plans destabilize included existing in thepension last four programs Federal and various in various The Plan impact oftypes creation calamities exemptions ofofTEFRA anpension d in they teon nactual llination plans. the claim.U.S. operation. To rates priavate certai chanpension ged _hen n exten radi plan csystem ally t, any sponsors will after assessme vary ERISA. warned nt across ofFron the of ZE--_ _ -_ Dec. 31, 1962 87,397 5,688 81,709 9,359 12.0 0 _::_ _4J ,---., o'3 ,..-_c.q ,--_ actninistration. retirement According When programs, to Congressional some It ispension state still consultants and talk extremely local and public plans as early, many and opinion however, asthe 30 federal turn to to 40 expect topercent Civil that of Service the ERTA growth for Table hand, For cbe Fiscal federal deliberation reducing hara neficiary the c and example, It teristi provides 7) inResponsibility ex roughly c iss. and cprivate plans' this lusive partially income rights, or category our aoubling for decision pension benefit tax analysis For onCongress specified expenditure the Act of the the benefits of on of tax(TEFRA) co trust totally the of long-term n IRA enacted expenditure cern contribtuions _ployees defined eligibility funds. nof estimates about ot unsubstantiated the 1982 stable only contribution was the covered 1974 reduced According 254.8 _mployee, should to leto , vfor elEmployee an high-income until tax of percent indi 1982. be but pension pensio toexempt on generated v allidually clearly Retirement rv_nnell the nhigher liabilities Yet plan plans contribution benefits other this allocated flawed workers, in on has the hand, 1982 the aIaverage found bei n were numbers come n 1984 basis tax g most growth organi with The executives through understand employment" workers be to defined generous paid the Defined ha Potential their v za e in normal tion. benefits contribution oto n not employment large pension employer beneficiaries the benefit and claus been structure" Implications reasons from professionals. retirement e. sybenefits stematic (DB) for plans. as organized for a the a because plan in lly year or ofthe baby earned program Prior are TEFRA mechanics or retirement Social If tax boom me more, often to today a these sured. in expenditures the generation Security were preferred this will ofpassage reductions programs. adjusting participating country On be eprogram entered because are of higher notable occur today, ERISA, calculated tax , than the they declined rates in exception some In work athe can the pension combination for for for provide pension marginal number purposes during cthem e,is plan. the the asof the tax the of almos plans, most pro undoubtedly benefit percent. visions tDec. workers on since than 31,the 1961 weeded oratheir othe defined cannot .8r out very percent hand, 77,179 contribution by beginnings. readily ERISA. beyond would4,829 estimate make 1990 plan. There Dan would McGill, thegn 72 This has ,350 the less not occurs never who extent completely desihas rable because 8,652 been written to for which any offset the many extensively substantive 13.5 defined their plan the effective however. 1971 Itplan is date. clear that As15.0 ERISA expected, has provided most of152.8 some the positive young plans reforms; have more 8.6 it has work rs employer _-_ pension contributions -'_ _-_ U and • ° personal • ° • ° IRA _ contributions and the interest losses Conceptual or tax Background expenditures on Retirement that can be attributed to the favorable tax 1961 4,919 374 4,545 4,468 361 4,107 8,052 CONCLUSIONS reduction and control of Federal expenditures, these Dec. 31, 1960 67,792 4,094 63,698 9,399 17.3 discourage TEFRA is being _nployers applied fromtoestablishing a system that newhas ones. been buffetted for most of the Budgets. explaining The defined the changed benefit estimate plan provides from one a clearly budget to stated the next. retirement There is income also a various implications Members segments of TEFRA ofof Cat othe ngress this employer point from the in andtime Washington planisuniverse. an exercise area have Thein been variations the fine art will of potential late 1974 0 problems to early m _ during o1977, thepriTEFRA vate deliberations pension programs their concerns conformed were to ERISA's largely I:_ -_ (1) © _ c,q _-_ c_,l .,_ Program Tax Expenditures 31 1962 5,188 476 4,712 5,030 383 4,647 9,359 .k 1972 17.8 169.8 I0.0 but to rank and file workers as well. full small consistent Retirement ramifi plans cations tax withthose System. may expenditures of beW]_ile that TEFRA terminated. used the are havelatter never toyet estimate mentioned. Others taken does effect the not expect private Yet include or that bee it n plan is large measured. all clear number. numbers federal Because civilian of of met Security provided investment that uSo The nInland most der cial impact the Act and Security ofSt account. plan. these eel's the (ERISA). of plans distributio contribution TEFRA original Without This are n onnot legislation comparing disagr the limits of themselves these U.S. eement aredoes private the benefits indexed. annuity not _ith actual pension require plans. that So the levsyst_ll are el leads employers 4_ union /of earnings At will benefits to withdrawal over to serious vary adopt in the expenditure Budget effect rapid marginal newly plans well. redistributive the federal retrospective rates 1950s may limits primary rise result qualified may than of on The and for citax benefeits ERISA vilian be inprivate Treasury in 1960s. estimate modified c rate female in oncern the credits onand capacity and the plan of prior plans. The that net analysts labor only military workers is to implementation formation ratio whereas year's growth are keep of increased likely forSocial paid ccovered use ewill pension retiranent in estimate. participation the and today. defined defined to decline Security hy by actual termination. be contribution of11 a programs Underestimating pension an benefit not undesirable Again, percent $592 contribution or adequate because rates ameliorate in none plans co used Based vtaxes rates er during between of level policies. ofabout consistently to on fewer the paid (DC) the its for the compute of Internal marginal the poor B 5middle- benefits on udget covered 1970s percent plans current There t_o rate the materials Revenue exceeded and tax are and workers, annual pension of toof the isrates the an on preretirement spo evidence, contribution these npension sors. TEFRA If calculations. the inundated however, contains Any employer programs credits earnings individual that with contribution the haand v will The esuggests calls most who topolicy, be analyst be is from repla significant benefitting that funded to ced angry, who notes the the until worker's generated inmajority the that frustrated changes frthe om period pension even end the the of for maximum of pension in terminating prior retirees. their which account employer-sponsored the contribution career. they tax enactment plans is occur, expenditure not could In of taxed pe also r participant created Z _ some than problems. older plans One do. stark Less than difference ._ 10 percent in the of evolution the plans of that paid to these funds. From this foregone collections estimate Treasury provisions Hethodological Dec. 31, afforded 1959 pensions Problems 57,835 and in Estimating individual 3 536 Retire_nent retirement 54,299 acc 6,792 ounts. In 14.2this case 1963 5,840 441 5,399 5,304 453 4,851 10,250 that if these tax amounts were treated as line items on TABLE 2 /vlany of the critics of pension programs point to the tax expenditure lack last ten of years. analysis The explsystem aining has evenbeen greater extremely discrepancies resilientbetween until now theand 19 may 83 and Tile Dec.1981 The 31, 1958 Budget Nationalestimate $0,569 Association of this 3 of 062particular Retired 47,507 Federal tax expenditure Employees 6,551 for 15.9 fiscal year level generally related to years of service and a measure of salary toward arise prin ucrystal nheard. cipal 1973 onball the The regulations. gazing. basis _ashingtonofMany Itplan Post 20.7 of is the ofsize, important April pension the 6th n toumber ran provisions note 182.6 anof interesting thatplans 18,857 that offered are defined storyby included 11.2 the benefit in plan thisin Program Tax Expenditures 34 1964 6,581 509 6,072 5,127 532 4,595 10,667 Dec. 31, 1957 43,615 2.659 40,956 6,074 17.4 low-income a defined cross My various testimony benefit the workers WAGE expenditure segments AND plans today in SALARY line of may will with WORKERS the side beemployer focus theterminated AND of lower onBENEFICIARIES the and three rates plan Budget and points. that universe. , replaced would PARTICIPATING they The first would The result withvariations is for defined thatthe the consideration or employee the pension In benefit Little retir_nent, 1940, costs pension empirical formula a of sharp it alternative programs. vested does for evidence increase purposes cparticipants apture WSere tax exists in cof orporate at voluntary prodetermining visions about least are inc generally plans where 90 ome of benefit percent tax pension areorrates established, why given levels. of programs. secondary greatly these a Benefits costs expanded however, lump-sum pl Itans isanda is Budgets. Ser or implementation qualifications provided prospective. maintain benefits negotiability tax but return total that impression the vice other These expenditure significant will because pro U.S. public determination to vto isions In preretirement apply and inspecific estimate work fact, of of the and documents This of was earlier differences toERISA more pensions for pension net currently force something the pension isindividuals workers defined letters beneficiaries. earnings as especially explain provisions 1984 and community linked , more in tax ear in who contribution paid plans n Budget edunder standards. excess Table the expenditures. would to reasonable benefits today across revised of retirement its the estimate one of benefit. 4 ,mandatory the case The 23 shows however plan plan the estimates. will This U.S. explanations percent. of at benefits relatively vHowever arious growth. ,the or overestimate the retirement will the Tax that annual the 1982 , sectors Code 15 time in more If /these other, if of 1979 fiscal small rates the have stable Ifage these the the and likely tax exceeding 1973 been magnitude plan the the provision of the expenditure year number pension other defined two the average be plan is roletax two the of of of regulatory be limits whereas during estimates ERISA so classified. under the and thelegislation, for first defined TEF_A this the period provision In was benefit 1984 fact, reasonable then theBudget of accruals the the time the Pension government did bill and employer not can will Benefit deliberation be know funded foregoes almost pension how Guaranty certainly atsuch paymen $500 that a in Corporation t went later s contributions tax be tointo in retirees revenue. point a their high (PBGC) in or were (.50 part, retirement had been thissays crplans eated is the it since in result hasthebee the previous nofpassage hearing the arithmetic five of from ER yea ISA retirees rs in involved r1974. eporall ted in The over fewe converting changes r the than five sto incks TEFRA workers subtracts the estimated tax collections on pension benefits pain. The net the Treasury llnexplained _ 0estimates ...... Variations the in federal tt_e Estimates _ tax _ revenueO_ losses that arise 37 because 1965 Dec. 31,7,495 1956 37,512 190 6,983 2 308 34,882 6,037 4,944 524 16.5 5,513 12,496 1974 24.8 194.5 13.0 numbers as automatically a basis _ _ ,..._ for come significant under o • • close ° tax o . scrutiny policy _ of and thepension Congress reform. These survive TEFRA IN relatively PRIVATE SECTOR unscathed. PENSION BEFORE Then THE PLANS again, FORit SELECTED may not. YEARS 1981 1984was Budgets. $14.7 billion. The estimated The 1982 fiscalBudget 1982 estimateo tax expenditure the 1981 due fiscal to net year exclusion tax the end of _ployment tenure. The defined contribution plan, on the other pla TEFRA regard ns will on werethe not terminated Federal take effect Government's between until af 1975 experience ter athis nd year. 1977, with itsEven comown ared ifannuitants. there with has 15,514been such an sponsor Inconsistencies Dec.acn 31 ou d , n1955 try, the characteristics who in 31,943 are IRA and wondering Pension of 2 005 the workforce what Tax 29,938 happended coveredto 1,769(1) by ta heirplan. 6.3 _c-__--1 _ _._- t4_ _0 ,.-_ oO 0 _'-,_ r--I_ ,--I _.)._ -I-_ 0 will care sufficient ontribution arise established. and on for plans.8 the thethis /Budget basis Some comparative Ifof Bureau. believe this plan is size, analysis. 9/they the the desirable arenumber W]_at setis outcome up of immediately plans primarily of public offered apparent bypension bysmall theis that the prevalence are "exceptions they benefits established distribution. indicates types estimates Through in indexed c June entives must of 30, paid plans played an that 1955 of to c to if omply arduous by to keep can the In there tax all e establish asome mnormal bc ployers central with up in 30,046 private are process compared cwith entives instances, workers structure" extensive role inflation pension pension do offrom for in with use telephone 1the 877(2) the pensio an reporting of programs. programs, after employer their several equity consideration n taxes 28,169(2) discussions plans, retirement. pension did and perspective. will years particularly 16/ not fidu along arrange c of iary programs exist of with 3,290(2) There tenure with TEFRA. then for In requirements be various other c is ause who this cfor onversion no the13.2 will Furthermore simple regard the fa man's manpower staff ctors, be 1938 and 198 of ,at 2 expenditure qualifications parti marginal pity benefit assured subject beneficiaries highly go tax vc ernment ipation expe that compensated. nplan ditures. through tax of more sponsorship was creation rate much rates and today, con onl acern of terminations discussion yduring defined None 2however, 23 3rate is or percent percent not of regulation, the had benefit and the placed results 1970s. persisted, is between greater federal debate applied plan. on 2/the inthe in than significant 1956 agencies nearly tax to Nlost recent quality the the and expenditure defined 190,000 minimum 1982 years. that of September overestimates estimate data regulate contribution net of The and estimates $23 plans 1982. dialogue a or in n billion alysis monitor would ofthe plans Between should retirment has in have that 1982 IRA be contributions marginal will has X to time.$I,000) flows. found Top-Heavy affect Thistax that It offers during both bristo acket Plan about also the trust thethe Provisions 40 duri plan the substantive percent nfunds gperiod. result spoDsor their were of ofAt retirement the tax-deductible uncertain For the elements the opportunity participants plans beginning years. of proje thatcexpenses plans tions to ofT primarily in period he fund defined benefits as the Iof /2, . well benefit benefit plan assume the However, pras ovided stock to key that their plans athethe difference assigned pe devel r 1975 r opmen etired annuity in is t. the their beneficia model chec estimated ks. ry. when 727.6 / we Fo tax r called plans expenditure toope ascertain rating210.7 resulting twent such y-five information. from the years tax14.9 otreatment Nor r longe was rhe , neither pension Expenditure and IRA Esctima ontributions tes nor the fund earnings are taxed 44 until 1966 10,124 603 9,521 8,059 607 7,453 16,973 June 30, 1954 26,464 1 585 24,879 4,204 20.3 critics have not applied their analytic capacities to any thorough discussion UNITED STATES SENATE CO_$'IITTEE ON FINANCE of Among employer YEAR planpension sponsors PARTICIPANTS contributions ERISA was IN PRIVATE seen and trust asPENSION the fund inevitable PLANS earnings result was 75.7 of the percent expenditu hand, r provides e for the for identica specified l category contributions of plans to atan $23.6 individually billion allocated -- a 60 terminations If these Among problems the various duringarisethe TEFR among previous A provisions other nine plans teenthat and years. may persistaffect It beyond is the clear the creation that start ERISA and up Other Foibles and Inconsistencies 46 anticipatory response to TEFRA, the data is not yet available for assessing 1967 June 11,292 50, 1953 22,069 602 10,690 1 394 20,675 9,229 3,657 705 21.5 8,524 19,214 1976 33.0 248.8 16.7 • .,_ _ oo L_ _ .._ have is avail co The a nble tributed Congressional in this to the area. historical Budget The reason growth Act that of ofbetter pe1974 nsion analysis protection. (P.L. 95-544) is critical The second formally is Bu Revenue Trowbri minimum policy contributions professional do the plan adding d the get not distribution The sponsor and recent have A dge itstandards cin se t 12.5 has cargues ond had the automati an service precipitous never then percent npublic notreason : the c into of the cha been c n provisons haracteristi corporations ged employer greater foregone coverage, anopenly that changes the annuity csthan plan current provisions federal to dis in participation, cussed cthe onvert so contributions these program, of high-income 19 tax estimation the 8in 1 allowing estimates the would workfor estimate the but accCongressional vesting umulated ce the increases be sele professionals are tec inthe c plan c hniques tive around overed seen anditself 19 assets the benefit 8 coverage as by 1$5.3 forum. result an Budget. acan basic seldom plan. ominous billion tofunding. avoid of in an private pays biased thesign for 1956 the developed cmanagement. pension covered presented tax often employees omparison Treasury The Why liability andcentered stabilization by programs 1974 then, separately there between tothe Departme Over would be there are made new if onthe have nbe was 1975 special t including the of for bet_een plan. years, $592 steady pension a ever federal, and impact provisions without ge This the neral growth private 1980. identified the unions parti abiiity state that explanation the cipation federal inActual pension in pension and themselves favorable newly TEFRA. toand local, grant net cic created vontribution or ilian of evaluated rates growth First tax $2,546 past the have and provisions private revised defined during negotiated TEFRA service retirement was with thelimits provides 40,348 factors the it. fiscal plans. benefit credits late and allowed vigorously program that 1983 defined for the 1970s isandandso f administration. values worker program to terminated greater undi such n June g which individuals extent tax retires of 30, during 1952 expenditures. prior themselves during and Itthe service 18,289 bis y profitable early isare encouraging this eligible subject days credi section of periods t 1s 271ERISA to to an that dinflationary receive of aand mortizatio the were 17,018 the to Congress recovered the delay tax$i,000 nand code of contributions ismarket 2,347 uby n concerned fu plus repnewly nrded esent for $i00 cli es established 16.0 a about almost during in bilities that interest the able nearly ERISA If to 49 these prope v evolved ide rcent problems such had through documentation arise fewercareful than among five o and ther in active time extensive planfor s pa and r development ticipants disc persist ussions pe beyond of r bet_,een beneficiar this thediscussion. start ymost . The of retirement programs. benefits Relationship are paid. to The Othertheoretical Tax Expen<_iture basis for these estimates is that if 1968 12,896 672 12,224 10,886 771 I0,i15 22,339 investment account. ACTIVE WORKERS of the Junenumbers 30, 1951 that are 15,899published 1 125 in the 14,671 Budget each 2,517(3) year. They 20.7 have not percent policy higher process increase. in the establishing 1984 There SUBCOkNITTEE Budget was absolutely ne_ than ON rules SAVINGS, in to the no resolve expla 198 PENSIONS, 3nation Budget. problems AND in The the proje in Budget the cted pension documents growth in mainte period resul that ted , response. nance Congress in aof drampensions The atic mayIRS increase want data areon to in the plan reconsider planchanges qualifications termincertain ations to taxoffor and deductible thewha terminations provisions tever contributio reasonfor in . this the n 1977 38.4 290.2 19.7 Ca t egori es 47 1969 14,692 969 13,824 13,383 861 12,522 25,905 June 30, 1950 13,899 ........ institutionalized O f.z-] 0 0 _--'_----' "tax expenditures" as part of the 0regular _._I _-__ Budget ._ _ _0 document. is ERISA taxes. that alsoAthecountervailing created pension the system's WORKERS Pension opinINVESTMENT ioi growth Benefit n holds pattern BENEFICIARIES Guara FOLICY that nty has they Corporation been are sensitive established PER to BENEFICIARY ensure to cas hanges a the level in sponsor's various fiscal that employer that Self-Employed Among additional pri 1982. That vate indexed work contribution thetile Few various force. pensions, pension employer components individuals andThe TEFRA in Personal reform contributes 1981 1942 a of provisions vital are Revenue by Social is Service 63.5 yet high part receiving Security. Act the percent on Corporation of thatsame and sc_neone's the may (i.e., percentage U.S. amendments significant Pension affe Plans legislative retirement $38.26 ct programs of - the / to IRA The $60.26). pay cit reation based provisions agenda. system, for in dothe every annuities As not and 1954 stated are defined 1984 was pension promote pensions particularly annuity benefit significantly Relationship for defined-contribution estimates three-year not estimates pensions contribution because benefits atplans. pension and of cliff retirement. retirement to in attractive that individual affects Other pension in plan the orBased plans. six-year help the plans. 1984 creations. Taxon program traditional parti provide the B The where Expenditure udget the retirement cipation In graded 5/ tax more same each tax has an new While It expenditure criteria, sense. v empIoyer expe esting. been of typical is jobs was Categories nsimple programs important these ditures pieced for not ishowever, nineteen younger Second, cash-out growing. estimates economic offering together. isto hathat vnote eworkers years only provisions there It athe theory that on ,pension isn't was One 144,000 pe qualified as federal are n18,857 the sion reason suggests older in the minimum for result these defined defined system military for the tax plan ones of the in were implications accrued are completely leanernot This Itnotseems times. on always tax bias a the deductible. of tax then in understood. these Itdefer the fund thatis rtax al changes since partly other expenditure Furthermore, and on "exceptions its this not the investment. a difference creation tax estimates income expenditure to the accruing and inwill If normal funding maintenance thedecline, as person to structure" discussed requir_nents either to is ofstill some the pensions later give employer extent, in that rise inthe in to as 50 changes of the One major possible in this parties relationship reason interested for with using ,-t in ,--t inc i-_ra easing ,-t higher healthyplan G tax ) pension age rate ar assumptions e system. too consistent inTEFRA the to 1984 be up From period,a purely Congressconceptual may want to basis reconsider the tax certain expenditure of theestimates provisions in inthis employer contributions to pension trusts or individual contributions to IRAs 1970 16,512 1,142 15,370 16,062 1,164 14,898 30,268 1978 44.0 321.3 23.1 _ _ TABLE ,,_ 8 ,,_ I considered imits. the structure of other tax code provisions that affect the Section this category of the Act. of tax (Mi expenditure 1lions) was (Mi 254.8 1lions perc)ent higher in the 1984 Budget explaining game.JuneTEFRA, covered 30, the 1949onchanged employee the 12,865 other estimate ishanda is philosophical 711 from broadly one 12,154 perceived budget strength as to athe 896of legislative next. the defined 8.0The gameonly In the defined contribution plan, investment performance directly affects Conclus lastAtquarter ions the same of 1982 time are n the ot number yet available of plan and qualificatio TEFRAns_as only declisigned ned markedly. in 49 to law mm _ m dune 30, 1948 11,742 484 11,258(4) 1,888 20.1 of TEFRA have eliminated the disparities between the tax treatment of of The vested act_ defined benefits O_ _ taxwhen expenditures defined benefit as "reve 0 _plans n_ ue terminate. losses > _ attributable to provisions difference Internal public so ex dire maintenan private retire. above tremely cthe tly This The Each the policy. ccontribution tax e The sector's Reve historical sensi provide of lump-sum 1983 collections in nSocial tof the ue ive the Budget The pensions tax Code for answer third two distribution Security toarrangement. expenditures response estimate on public any modified Budgets such isto areAct's of postretirement the policy of annuities of the the the the phenomenon is isretirement measurement cprovision The kinds hanges developments. that calculated pension tax underlying cannot qualification of the tobenefit indexation system analyst results plan tax aof nexplain on d a deductible cost anprinciple bottom related toindexation. who in item standards the of the inherent under did the by tier tax discrepancy to counting of the c item tax ontribution tax of and in equity and 1983 incentives retirement basis Private expenditures So c regulatory c hanged ial of between Budget is atthethe establishment the benefit contribution first that collections. retirement this simple c lower ountry time. or contribution program incentives This plans mathemati exceeded Some is not may would policy included? cal yet will notpro terminations have mature. be v analysts isions result calimportant cOne APRIL ulation been For reason in for believe ll,less created by example, non-key if1983 of is more response thethat parti thatbut employer employees. consider c,ipation current than theactual militry it a has the provisions isgrowth ten-to-one Third, arates case plan retirement impossible was ofthere where and a in157,175. ratio. brand the program is to is the new this large programs plans makes benefit this this The testimon sectio country profit are portions mature plans latter noften y. sharing oftoday. were but the point T of criticized o chance can Act. terminated tax plans Irelates never hope expenditures elimi bethe cause n that ation between be topredominant you ittotally a of is understand attributed 1975 third plans feared resolved and difference typebeneficial 1977, thethough oftoabecause cdefined cumulated compared ,pensions between thatto of contribution itthe DB with lowe funds because is and wage r and are 15,514 still DC growth they instance or percent Budget coincidental. evolved em1979 ployee are caIculations tax quickly i flawed bracket n an Atestablished in the because an theothe than environment tax 48.9 r used liability the end trust estimation a ofof year fu on the overwhelming ndthis was pa earlier procedure r424.0 ticipant retir_nent taxable. /is beneficia budget does theThe inclusion in r not y c1921 ome deficits even Reve will 27.3 attempt range, n ofue when beAct public $550. to the _ _ _'_ 0 ............ .l-a _ U _!_''_ _ _'__-_ were 1971 taken 22,493 as regular 1,605 income that 20,888 additional 18,171 tax obligations1,730 would arise 16,441 at the37,329 Aug. 31, 1946 9,370 -- 9,370(4) 1,584 20.3 estimates. FEDER They AL REVENIJE have not LOSS considered ESTI/vtATESthe FOR life "TAX EXPEN])ITURES" cycle structure DUE TO of earnings, the than level inthat 1950 of theindividual benefits. prior year'sworkers Be9.8 cause estimate. enjoy contributions benefits Again, 0.5 none and of equal interest of thevalue. Budget accruals 19.6 materials relate to or explanation being played thatby policy we haveadvisors found for who the do not 1980 understand and 1981 Budget the pension differencessyst_n is by on September Dec. 31, 19443, 1982.7,786This does not -- mean, 7however, ,786(4) that 5,859certain directional 500.0 For Lowerin plans g Section that primarily 415 contribution benefit key limits employeeswill there reduce are pe special nsion The number of newly qualified defined benefit plans during 1976 was only TABI,ES: 1 St_nmary of Qualifications and lerminations S 1972 28,265 1,745 26,520 21,070 1,775 19,295 45,815 1980 54.7 500.3 31.7 limits. of the Federal NET The EXC Section LUSION tax laws OF 415CONTRIBUTIONS which dollar allow limitations TOaRETIREMENT special on annual PLANS exclusion benefits FOR , THE exemptio payable n, or PENSION in 1982 Sept. GROWTH was 1, 1942 $25.8 AN_billion. THE 1,947 SENSITIVITY The 1984 -- TOBudget PUBLIC 1,947(4) tax POLICY expenditure 1,288 estim 195.0 ate was $17.1 the provided middle income the plans Se plan curity. Under tax - $5.5 income sponsors established has 1955 cto billion ode further ERISA, Most pension wo to rcan kers pre pension estimated private byincreased cnlude ot parti the toc14.2 ipants fully reduce self plan benefits employer here awareness _ployed spo underwrite the and n today. sors bear tax pension theand that defe from $2.8 aFrom unanticipated fairly rr those 1.0 economic als discriminating billion plans thisset direct available discussion, generally security upestimated by inflation relationship individuals in to for must favor I14.2 in athe in hope small their with provide the elderly who of the 1984 a Consistently estimates numerator drastically a number such hSen considering evaluate often is margin. provisions taxlimitation totally law terminations these not , of fa retired the vused That oring (pension pension figures is unfunded significance a lower there offairly for new $200,000 is, and retirement during was are benefi retirement marginal participation) a one with each well new combined, cgreater iaries but of the of outstanding documented. analyst is programs any may previous tax tax income considered employees net be on the code prepared rates population important did security growth are expected nineteen unfunded The modifications unwarranted. not salary for pension to the inkeep purposes. 1975-1980 ifyears. the the be liabilities surveys. 1984 current an that up number elderly. system Budget "exception with without It private There can workers of is For at is estimate. the The be clear defined the is clearly undertaking plan considered example, to utility are virtually denominator end that the benefit given increase of sensitive The ERISA of normal fiscal the new the elimina extremely plans. p pension phenomenon tog ram. ted plan Inearly current cited thein to defined aearlier. firm expect taxation with contribution thatmiddle of the income full age plan, and ramifications for investment younstock ger workers. bonus of performan TEFRA andc For eprofit-sharing have several directly yet taken years account Given workers pension Social , the for especially reform time the Security significant price was considered those Integratio of money, employed difference n this in - the by is For in the context equi defi tax Federal valent nedof collections closing government. to contribution the tax on taxloopholes current plans "The liability mean TEFRA benefits forannual if the pattern _3 is compa 0_"_ rably consistent. More _ than _ 55 percent 0..._ of plans less than five time the contribution 2 Participation is made. The amount of the tax expenditure, however, 7 is 1973 33,830 2,222 31,608 25,775 1,908 23,867 55,475 Dec. 31, 1959 659 -- 659(4) 549 -- _.D _ r_ .,_ SELF-EMPLOYED AN]) OTHERS PRESENTED IN SELECTED FEDERAL BUDGETS benefit 1960 accruals and marginal 18.7 tax rates 1.8 that provide a radically10.4 different other or itspubli In problems. cdefined docmlents benefit Furthermore, explain pension theTEFRA revised plans, is perceived estimates. as in most as a precursor group insurance to more _'_nnell who writes that the "Revised estimates _ploy higher, and therefore provisions specific persons, in TEFRA. theThe risktop-heavy of adverse provisions market performance are complicated is borne in by several the abou contributions implications t 1981 one-seventh ca and nnot benefi thehet m_nber shypotheized. 60.2 relative of plans Before qualifie to salary dunOertaking 520.2 only for two some such years highly anearlier. exercise, compensated N/A And it _ _ _; _ .,_ f-_ °_" . 3 -_ Contributions, Assets ano "_ .,_Benefits _ c_ .,_ 9 1974 32,579 2,577 30,002 26,806 2,207 24,599 54,601 BUDGET FISCAL YEAR have ubillion nderThe (1)incorporated a Si(or discussions x defined month 66.3 totalpercent) benefit in the of past these plan higher were to issues because take redu advantage care ed of added bound fromoftrust $136,425 corporate to take fund on contributions pension to a sense $90,000. tax of and sponsor's m_nbers effect Census affects no st c earnings defined overage deduction ructure" extantor Bureau's arrangements, of1965 re benefit the ow been on data cthis from eived of nersa level taxes, measured. that Committee gross annual nondiscriminatory and at pension allows officers. of but the income the March 21.8 benefits. end is might analysts principal progr calculated or ofIncome garner which ams. a basis re to Because cprovide Supplement is eipient's Secondary aevaluate asto better one though all 2.8cof ontributions aemployees perspe the plans, special cequal all to areer. c ative ctheir tual other therefore, age benefits. credi Current o This utilization exceptions nand 25 t, peor nsio indi a interest 7.8 Population n older provide c preferential ates Equal poli are of with cy part analyst (workers) pension was substantive Budget. resulted is the 198l the andof The employer responsi 334,000 option ofparamount has purpose $476.9 tax The in v during e bee a expenditures empirical and nwill dramatic plans; discrepancy billion. to a of importance. bencouraged a lepolic make this period to yactual research. increase partially hearing contribuitons, estimates Under ch in is an to ge. The whi increase even the transfer cin his policy clarify This plan computation then the harded to , representing me latter was focus terminations to assess is an th sthe eextremely only to th was a discrepancy. method on new tthe reconcile growing pension program. 197,523 income foregone implications for used limited whatever padequacy o to at when licy plans. T tax unless h estimate Iteunprecedented difference must of collections the reason. is since Table TEFRA considered also be Budget's them stea the ford in no 4yin plans pla for does nspurposes over established not the allow of number making by theemployers contribution plan of defined contributions. to ben rate contribution efit below "some Fourth, the orplans. all" Social top of hea During Security vtheir y plans 1974 workers. taxable the havenet numbe Unexplained pension years earnings the Another rriold cof h. has from high hadVariations been difference -It income the twent was taxed total y understood ortaxpa at in mo civilian between the the ry eers active point Estimates that may population DBwo of not and r ERISA c ke ontribution r be s a DC pe would employed r wise plans beneficia polic and result y r is full y, if option that the in while time taxes some they to less in pur c plan sue olle are 1977 than ctedwas 11 paid and the time discounted value of future tax collections based on current not simply current 4 Creations, reductions Terminations on tax revenues and Netbut Plan recognizes Increases that there 13 _,ill be 1975 15,319 4,550 10,769 14,720 3,558 11,162 21,931 (2) See RR 101.-4 >_ >'_ 1980 ,"-,_, 1981 1982 0 _ 0 1983 O.8 _ :1984 _o distribution of the tax expenditures than naive cross sectional analyses. They Through benefits 1970an arduous are rarely pro 26.1 cess the of same telephone as benefits 4.7 discussionsof equal with value, various5.6 because staff at move changes. realistic,With marginal the publication tax rate assumptions. of the 1984 These federal indicate budget there a substantially is new individual worker. Under the defined benefit plan, on the other hand, the executives regards is worthwhile , not and to professionals. theshow least that pension of which If these policy is the reduc changes determination tions matter. occur, of some top pension heavy status. plans the number of newly qualified defined contribution plans in 1975 was only 5 }_orking Participants Per Beneficiary 58 (3) Increase from June 30, 1949 (see RR 101.4) interest income considered. It appears that virtually all of this adjustment d_onstrates rate of tax, a or marked a deferralshift of(in from taxmillio defined liability." ns)benefit10/to defined Within thiscontribution context, tax the issues fur asset v one provisions. of pe Similarly, and arious nestimates th sion Organized the even er. or acc in1975 umulations more normal types be handed general, the neficiaries for labor years These dollar of if fiscal structure and pension also the of provisions incontributions the service. with pension 1982 30.3 played defined potential plans. foraissecond purposes $19.515 may a system c Employers ontribution major To under implications result li a n billion certain of e role is aof must 7.1 deri oefined to in idefense v n plans. ing also (i.e., ebe the xthe tent, of c evolution the stable. TEFRA ontribution adopt against The disbanding $45.280 any estimate. May in aassessment vesting the particular. 1983 of Erratic - $25.765). pe insidious plan 4.3 of n Current This sions scsome policy hedule of are ignores the inOfor total rates. inclusion Survey heightened tax 1960s that the income Ine cprivate al x ohas penditures fgathers c recent employees Expected maximum ulation, of defined especially proportions Keogh years information pension to private vary ,arises be plans but benefit private highlighted more asc n se ontribution is o in in to ctor tha on considered. age, benefits this the n pension plans the employment the coming sex, case. the prevalence OASDI increased needs contribution will and growth year There other growth of tax be for of has isthe rate the paid, risk two no b roughly yelderly. limits during contribution re reasons, below 30,000, characteristics. ceipt and have approximated thus, the the of been while The contribution pension 1980s to there first indexed or defined is and the inis are only terest no structurally had accruals in important special the Through My At One dra_broader testimony of the Section relate in interest the an same thecontext problems a different. dcase ministrative 415 today until to timeof limits of specifi with period the will benefit other This cnumber the when ruling, focus 2.estimates persons, tax ismultiple of enhancements. Inon provisions. important plan pension this threeof qualifications the plans instance tax points. tbecause risk rus are expenditures Yet Under tsthe virtually of offered. The also person itad DB declined first verse were affects plans arising no does is Finally, analysis market markedly. accorded that such notfrom the the avoid the of approximately terminations, (4) LgO 28 z month $13 but period, ,849. that _g average N was The2,507 accepted mean plans annual perbecause year salary those o_ plans level O were of Federal believea employees to contributions percent of theunder oldest these plans plans. reporting From had as a more many practical as twenty policy participants analysis per future tax collectio 6 Federal ns at Revenue the point Loss Estimat of distribution es for "Taxand Expenditures" thus represents 59 taxes 1976 4,790 8,970 -4,180 21,030 6,775 14,255 10,075 _0 _ o _ L_ _ _; L_ _r_ _" 0_'___t" _'_ C'q,-_ ,_ -,--L) 4--) _ L_ _ t_'_ have (5) totally 9 month period ignored , 1/1/82the- 9/30inconsistencies /82 in the actual calculation of these evidence the Treasury 1979 that Department the pension 35.2 a syste_ generalmay explanation again9.6 become of a thetarget revised of fiscal the3.7 budget 1985 and larger may be modified tax expenditure to keep pension for private contribution plans." ra 13 tes / The for explanation middle- and that low-income higher The about individual ERISA one-half Experie is promised thence prior a level year's oflevel. benefits related to final salary. Adverse One particular problem with top heavy provisions could be the potential for 7 Employer Contributions 42 1977 6,953 5,337 1,616 28,463 10,478 17,985 19,601 THE effects GROWTH ofOF inflatio 0.,_PRIVATE _ q.)n on PENSIONS retirement income. = L) 4-_ 0 _ one-half SOU this that redu canR ced CES: be kind satisfies laid from to is Private directly now $45,475 one-third one available. plan Iof to to three contributions $30,000. the the inclusion vesting rate These ofand _o_ standards. of the limits the benefits last opublic arehalf _a_ One to from plans standard of be frozen the U.S. for1970s. the requires Department untilfirst Slower 1986 total time. of 1981 this the personal combined the expenditures United Budget $17.135 extent In summary, servi effects States. to c$ billion eare 2,125 which corporations. defined defined ofWhen one is Social $ Inland 2,520 attributable "exception" ascontribution "exceptions Security's Steel The might Company tohigher plans higher toearnings be the in magnified define itiated cnormal ontributions estimated and individual struc mandatory by benefit ture" contributions its limits relationship equity retir_nent of formula individual now in andto with Population paid plans d implications enhancement that offsetting frequent rate istributions Over the the above since to a Federal CPI. adjustments the trust tax that can 1976, Survey ofyears, to This TEFRA be reve ikey n fund although come Budget granted being nues indexing the will at since employees taxcombination continues this c collected tend onducted the level. none on provision point desirability the toprior exists, basis to destabilize Prior in that by of be time permits preferential to plagued of the eto The nter prior of is age TEFRA, Census benefits an this the pension existing by 59 exercise service. tax the shift unprecedented 1tax / Bureau 2expenditure differential paid benefit treatment, has are pension inWith are and not subject the a financing been fine deficits De all jointly programs calemployer cplan ulatio to art widely taxable an.ofand contribution performan The special Withholding number cetaxofprovisions plans isnewly P borne rovisions registered qualified byfor the-retirement growth TEFRA individual defined has of benefit extended programs 24 worker. ,600 units. plans to Under istheprecipitous the "pa ERISA during yodefined r"was or 1976 signed changes the benefit was plan into only in the preferential prevalence participants' any beneficia co bevered unst taxes ar ble y. by by CSRS of atax parti nyway. understanding tax c in treatment, ipating April incentives It was was in and and tbought $16 thethe for ,attitudes 000." pension 1926 pension that14Revenue / toward plan; TEFR Inclusion plans, A Act the might the along taxes established plan. ofresult with federal are Inother in the merely this some DB workers factors, plan plan deferred with perspective, the estimates are further flawed because of the totally deferred, *Does n not ot 8include taxes Federal plans foregone. R covering evenue self-employed Loss Estimates _.,_indiv_ iduals for 0._ (Keo "Tax 0 gh0 ActExpenditures" plans). 44 1978 9,728 4,625 5,103 55,956 10,661 45,295 50,398 O¢:_ _._o _c-q ._ _ _.,_ .._. ..._:_ estimates, Commerce, 0to say _ nothing The National of the significant Income _ 4-_ 0and 0Product methodological _.-_ _ Accounts, difficiencies 1948-1974 and in 1982 1984Budget estimates terms of in1,925 equal the 1984employer 2,105 Budget $contributions has2,305 been pieced and together. accept theItnecessarily appears the marginal p 15roces / Alicia s. ratesH. Munnell were used , The to generate Economics theof 1982 Private Budget Pensions estimates(Washington is plausible. , D.C.: market finns performance to wander can in and reduc out e ofthetop-heavy value ofstatus. the pension It is portfolio certain that as in some the workers Anotherin 9 faline cet Assets of with the in Individual ERISA the lower experieRetirement nc rates e is that the Accounts would notable result shift for toward the defi 48 highly ned The most significant pension legislation in the history of private plans 1979 15,755 3,267 12,488 41,122 7,574 33,548 46,036 -I_ O _ (D CONCLUS available o th ers. While The SO(JRCE: IONS remaining Revised to there O_arles the is D. self Estimates no Spencer $2.4 information _nployed Associates billion ofmay forthe on discrepency encourage 1930the National to number 1975, more EBRI in Income of tabulations rapid secondary the Product expansion 1983 of IRSplans and Accounts data of for 1984 Kbeing eogh 1976 (July Budget 1983 atvesting _hen and ageBudget The corporate they sixty-five unequal after expansio will ten nbenefits tax be years in allowed of rates. the 1946, of that 2,170 role to servi equal rise the cof e. pensions union incontributions 2,560 The accordan other filed c$ in e 3,760 two athe with provide. grievance require U.S. Social retirement Defined with phased-in Security the benefit National vesting COLA income pension -- meaning sponsored and since indexation. discussed. this for crystal If discourage the The each union isthe trust expenditure far ball Brookings new that by program interest employers more EBRI gazing. wave Elements Beyond earnings. all complicated and of isand was Institution this, noncontributory. fa retirees from Ma of the vsocial orable nTEFRA y ,estimated The Department ,few establishing ,of private if the consciousness may which remai tax not 1982 n pension further ing by practically pro of replaces )orv new p. isions Health subtracti public $2.380 44. increase one. provisions have nroughly g /and v_nnell retirement will contributed impossible. billion the Human future the come prevalence explains that same programs, in Servi discounted under to are the cproportion the es that included ofgrowth higher closer other will defined taxes the tax of in 2 on 3 law have about plan, special the estimates on participants contributed one-seventh on Labor 10 thepercent from Day other in year to can the 1974 ta the hand, xbe .to number historical and educated year Also the was of that distributions plans individual largely toare growth understand qualified not implemented explained. of istopension promised key that only employees during two their protection. As a years level an 1975 benefits have example ofand earlier. benefits to The 1976. begin will second of And this administrator from terminatio the _:_ ns_first aof lso, period pension but tomainly and the Ise defe c those ond. rred O offered compensation There is by .,_ no uns .,_ ctax rupulous plans -_ expenditure the obligation sponsors in thisout of case. unexplained Undoubtedl variations y many inofestimates the older fromplans year to with year. high Each participant of these /beneficia problems ry to 1982. 1980 18,849 4,297 14,552 50,493 8,982 41,511 56,063 THE EFFECT1977, OF PENSIONS and 1982 ON);THE Asset BUDGETtotals from Federal Reserve Board of 1984 the Budget calculation procedure. 2,835 3,755 $ 4,230 What 2 comp 4Sources: the / / Sylvester ens is Sylvester primary aplans interesting t ed.Alfred reason define J. J. M.Schieber is Schieber, forequity Skolnick, that the there significantly in and Social "Private terms isPatricia absolutely Security: Pension of(some equal M.Perspectives no Plans, would George, published benefits say 1950-1974, astronomi Retirement on documentation and Preserving caccept ally) MarthaIncome the Renny higher on the case percent of the DC rateplan. was used However, to prepare the anployer the estimate has guaranteed for the 1981 theBudget benefit but and that finns 14/ Final that report are not oftop the heavy Universal could beSocial driven Security into such Coverage status byStudy conditions Group, The in contribution this country ._ plans. _has _been PBGCthe studies Employee indicate Retireme _ U there 0nt Income was Security some directAct. shifting _hile _ _ 0 (1) _-_-.._ 0 0 • 0 _--_ estimates Governors of retirement Banking program and Monetary tax expenditures Statistics, for 1941-1970 1982 was attributed and Annual to Labor se TEFRA plans. after created, curity a will Relations necessarily designated system if notthese ctake an Board pla period unequal ben effect straced (NLRB) are ofemployer until established servi through arguing ce after contributions. or the that a this primarily growth specified theyear. company's in6to E/v cen the ombination shield if unilateral number there the income has of of decision pension bee service nof an expenditure -contribution scrutiny, private * than adjustments. The Plan higher System vie_e federal creation pension s estimate (Washington, marginal The inover programs, this second provisions. and defined from statement rates termination D.C.: isnow the benefit were that Table 1984 provide The areusedplans. B Employee rates the those udget 1 in full reflects Treasury preparing dlanged of isBefore CPI Benefit the attributa indexation author the radically Department turning bthe le Resear dramatic and estimate ch to of after do tochanges postretirement Institute, not specific has increase for ERISA. necessarily recently in subsequent aspects in the From 1982_ tax tax is-by gather pensio of tax related discussed preretirement age Opportunities Many An nwithholding s 70 important such tofrom of Yohalem, 1/2. in final the information foregone more reason earnings salary. on in critics "Employee detail an pensions, taxes Aging that as below. Adverse for ofBenefit it received onAmerica: pension c is the urrent annuities market difficult first Plans, bprograms y trust Coverage performan earlier time. 1975." to and fund provide point c The egroups and defe Social contributions survey can to rrBenefit ed such of the redu Security retirees. ce will compensation tax retroactive the Entitlement aexpenditure nBulletin, eli d value cit The interest is replace to that he Ifat itathe the closely is spirit pension assumed, estimated ofsystem's the however, tax percentage growth provisions that pattern the marginal of favoring has their been pensions. tax final sensitive rate earnings in the to and se changes cond that period in -- ratios Desirability are in firms and that Feasibility are expanding. of Social High Security participant Cov/erage beneficia for ry FJnployees--d-f ratios 1981 23,789 4,536 19,253 51,748 8,906 48,812 68,095 11/ Sp'ecial Analyses Budget of the United States Government Fiscal Year, 1983 _ _, 0 _ _ _ _ _ _ Until the Treasury Department is _illing to spell out in detail the estimate 17/ This Statistical of is based employer onDigest, actuarial contributions various reports and years. on pension the Civil trust Service earningsRetirement is that federal System 16/ (Washington, pp. EBRI budgets. As 56-58. the ISSUE June Budget BRIEF 1976 D.C.: of "Federal and theThe November United Employee Pensions: States 1977, Benefit Government respectively; An Research Island is prepared of and Institute, Priestimates vilege each1981], in year from a Sea app. theof 1 has /12refle /See toThese Federal ctadjust Dan , data the M. cviews McGill, State ontributions are spelled ofand Fundamentals theLocal Employee toout make Government inup Benefit ofdetail forPrivate a bad nd Resear in Pri investment vate, cSylvester h Pension, Institute, Nonprofit performan 4thJ.edSchieber, .its ce.organizations (Homewood, Trustees,Social _Inile there is no information on the number of secondary plans being FRISA with has definedhad _--_ •,.-_many _._ benefit C_ ",_"_"0 _ ramificatio ._ 0 _ plans c_ ns _being for the terminate private _d _ pe _ n and sion _._ Z repla z_system _Lc 2ed most by L2 _._have defined not (_'ashington, D.C.: Office of Management and Budget, 1982) p. 3. 1982 I/ 22,102 3,651 18,451 45,910 7,668 38,242 56,693 •_ - -o'o _ _° _--_ > _ _ ._ _, 0 _ _ ._ benefits. 23-50. progr and -- changes 9/ams, age, For and Stanley in and military participants their the S. fulltax parti Surrey vesting retirement cipants rate in covered assumptions. a after speech aprogram nd by fifteen benefi toboth cfiled iaries. Money years Atawith first Marketeers, defined of the servi blush United ce.beone nNew efitStates might York andthink City, defined Congress that November the in SOURCES: 13 rate of -- information anticipatory iti /ncorporated Alicia would TEFRA assumptions. BudgetSpecial make H. Austerity" and Munnell, on response no professionals, their Analysis differen the The potential prevalence (Washington, to ce G Economics TEFRA, of if newly the there implications, and the Budget D.C,: of were established data level Private of EBRI, benefi isofthe a not lump cJul brief iaries United y Pensions yetplans sum 1982) comparison available States distributions or p.would (Washington, not. 5.Government forof The include assessing from defined maturity D.C.: for late public numbers protection qualified the increased indexing m_nbers, pension The 1974 policy. top-heavy as of toMay plans, sponsors, its maximum under in aearly 1975 basis combination The estimate pro aand rising third 1977 taxable vfor isions orDC March , other significant plan is of private with from income are 1980 the staff. is "tax Social B49 complicated that Current measurement and pension at expenditures" tax Dr. Security the the e_nployers policy Population Sc benefit end hieber programs inand of will several and 1939 do cost formula is formaintain Survey. Research not pension conformed to of employer-sponsored regards, 7 the bend 46,000 typically an tax Director reform. points estimable plans to incentives notERISA's keep the for as of These of - pa of 5 is 7//yments. Ii1.: Pension the lower /(Washington Mike _]_ong pension Richard pl Causey than a The Benefit n, sponsors Act that portfolio D.C. D. "Uncle's Guaranty , allows in Irwin 1980 the ERISA , ), as Corporation, first Double the Inc. p. was in individual then the Inconsistencies 1979) seen Whammy case the , Analysis as result pp. ofrthe on ecipient the 23- ine Retirees' of is 2DC 8 v,itable in quite Single plan. to for IRAdifferent. Employer elect aresult Checks," However, and more -outPension detailed ofDefined the the The of Assume Tax -- willInSecurity: the contiue simple Perspectives assingle-worker some plan , sponso on two-period Preerving rs continue example theto System expand used in (Washington, above the it futu was re, D.C.: possible but such T]%-_ derivation and numerical basis of these estimates they should be treated as c6 set ivilian /EBRI. Charles of 15,"tax and 1967.L. expenditure" state Trowbridge, and local estimates "Defined pension isBenefit plans developed wand ere Defined by included the Treasury Contribution in the Department tax expenditure Plans: An The The Since compliance Brookings questions Fiscal the funding Years Instituteion, posed with1981-1984 pattern by Public tile of different 1982) (Washington, the Law p. plan44. benefit doesn't 95-595 D.C.: structures fitOffice for the fiscal of mold inherent Management assumed year in and by1981. the createdBenefit , if these Plan plans Termination, are established 1976, 1977, primarily1978, to3shield vols. (Washington, the income ofD.C.: been - discussion Employee Expenditure systematically Washington Benefit ofPost F_s these tsmeasured. imates (Wednesday Research developments. o_g_cccc_l Institute One Aprilnotable , 6, 1983) 1982 exception ) , p. p. 5c2. 2.is the effect of ERISA contribution plans. Prior to the passage of ERISA, the number of newly SOURCE: EBRI compilation of IRS data. effects of the Economic Recovery Tax Act of 1981 would be to reduce the tax - contribution relatively 10/O To Overview," v Special er the the few extent years, plan, Analyses in participants. Economic that the the Budget Section can ombination employer Survival of According 415 the of has contribution United in preferential ato Retirement: single IRS Statesdaplan ta, limits Government taxon and Which treatment, affecti all willPension pla ng Fiscal be n creations affected multiple employer Is Year, for You? 1981 benefit retirement least lifetime that response. of and Budget). which historical plans defined is by The thecontribution 7S IRS determination earnings to data 80 percent. on records plans planof qualifications Virtually is toponpresented. heavy which status. such no anexplanation da termi benefit It nis ations clear has increase been for that the principal critics September Social retirement PBGChave Security 1977, regulations. 30, plans not1982. 1978, applied and accomplishes 1979). theIn their disposal 1975, essentially analytic of 2,222 these defined capacities assets. the same benefitresult. to any plans thorough There terminated is a,iscussion some in portion withholding. employer that in of has the theguaranteed At preretirement secleast ond period once the a benefit standard yea that r the the and ofpa person's y lio has vr ing.hasto marginal to adjust The notifyDCcontributions plan the tax beneficia pro rate vides rdrops y toa to tosponso polishow cy rs pro how will cess the still establishing tax have expenaitures increasing new rules in question numbe to resol rs vearise. of beneficiaries problems The tax inexpenditure the over pension the yea that rs. NOTE: This table is based on IRS plan qualification determination letters. •,_ % O O _D r-_ -- (Washington, D.C.: Office of Management and Budget, 1980) p. 207. and (Washington, published as D.C.: part ofThe the Employee Budget, Benefit Research Institute, 1982), pp. 3/ Ibid., p. 25. ,-.Y-,(D (D _ © © _ .,-4 o o o 3-34. plans were also reduced. Under pre-TEFRA provisions a plan sponsor with pro make these 8 by game. /vided the Diane up pro contribution TEFRA, v for isions forHal bad this oninvestment Gru_per, will the precipitous limit other effect "The reductions performance. hand primarily increase. Furor is broadly or Over smaller freezes, TEFRA," perceived employers. there Institutional as will a legislative To nowthebeInvestor extent added game of his or her right to change their status. - (February, 1983), pp. 71-80. 1/ Through EMPLOYEE Sept_mnber 30, BENEFIT 1982. RESEARCH INSTITUTE 1")20 N Street, NkV Suite 520 \Va_,hington, DZ 200_,t_ Telephone (202) 6-3t4-0o70

Volume T-14

Pages 62

EBRI Testimony

April 11, 1983

Sylvester Schieber

Financial Wellbeing Retirement