16 TABLE 3 THE DISTRIBUTION OF COVERED AND NONCOVERED WORKERS IN THE "NEAR-ERISA" WORKFORCE AGES 25 THROUGH 64 WORKING i000 HOURS OR MORE BY SELECTED CHARACTERISTICS, MAY 1983 Covered Distri- Workers Distri- Workers bution Not bution (O00's) Across Covered a Across Groups (000's) Groups FIRM SIZE b 16 Less than I00 employees 6,215 17.4% 12,352 68.1% TABLE 3 I00 to 499 employees 5,545 15.6 2,465 13.6 15 14 500 or more employees 23,869 67.0 3,314 18.3 T-43s 413 TH_ DISTRIBUTION OF COVERED AND NONCOV_RED WORKERg 23 12 II Total 40,702 I00.0 20,894 I00.0 Mr. Chairman, I would like £o begin by commending you and the other 17 IN THE "NEAR-ERISA" WORKFORCE TABLE 2: EMPLOYMENT, COVERAGE AND FUTURE BENEFIT ENTITLEMENT EBRI TABLE I: EMPLOYMENT, COVERAGE AND VESTING: AGES 25 THROUGH 64 WORKING iOOO HOURS OR MORE BEFORE AND AFTER THE RECESSION, MAY 1983 AND MAY 1979 L i UNION deferrSTATUS al and begin judging DISTRIBUTION all programs BY EARNINGS against FOR aNONAGRI retirement CULTURAL income standard unmarried concerned, retirees the Employee received Retirement pension Income income.Security By 1982, Act, a specifically Census Bureaudoes survey not pension Benefit Delivery coverage is nearly as high as it can ever be expected to climb. The members What issues of this would Committee portabilityfor raise scheduling for adequacy this hearing of retirement on a subject income?of special BY SELECTED CHARACTERISTICS, MAY 1983 TABLE 4 Union WAGE 15,223AND SALARY 38.2 WORKERS, 2,163 MAY 1983 10.6 Covered Distri- Workers Distri- Nunless cover onunionanything Congress but makesprivate-sector it clear 24,627 thatsituations. is61.8 where theBut 18,1 priority 5for 5 virtually lies. 89.4 That all of may the be found UnitedCongress 33 Kingdom, percent mustforofeventu example, over- ally age has decide 65 married had what 50 percent couples it is of and seeking the15work percent to achieve forceofcovered unm with arried tax by importance to today's workers and retirees. The Employee Benefit Research A number of questions arise in the consideration of portability. First, The Use of Preretirement Lump-Sum Distributions Workers bution Not bution Employment Coverage Future Benefit Total 40,702 i00.0 20,894 i00.0 Number of Workers (O00's) by Purpose and Amount (O00's) Across Covered a Across (000's and (000's and Entitlement the issuesbestabout nationawhich l policy, you are but concerned--coverage, it should be recognized vesting, as theportability, clear shift and in employer retirees incentives would mandatory pension had and private ERISA. portability plans for pension Is twenty the increase intent income. years.orsolely decrease The toSocial provide actualSecurity retirement retirement Administration income? income, or As Institute EARNINGS is a nonprofit, Employment nonpartisan research Coverage organization Total Vested Benefi based ts in (as ReporteGroups d May 1983) (O00's) Groups % of % of (O00's and EARNINGS ........................................................................ d ...................................................................... Employed) Employed) % of Employed) Less adequacy policythanthat of _I0,000 retirement it represents. income--the 4,107 And policy role10.4 of changes government intended 6,711employers to create 34.6 shouldretirement not, in recently isTot an FIRM alequal SIZE found bobjective that among savings new88,214 and beneficiaries capital formation substantial 49,530 throughnumbers deferral 28,708 of of retirees income Washington, noted, if "portability" DC. EBRI does is not defined make recommendations as permitting forcash or against outs which legislation can be $I0,000Lesstothan 524,999 i00 employees 24,545 6,215 1762.1 .4% 12,310,374 52 68.1% 53.5 Statement on Total less than $5,000 - $I0,000 - Over 1983 i00 to 499 employees 5,545 15.6 2,465 13.6 income should be carefully tested to assure that they meet that objective. my $25,000 opinion, It is or difficult more be left out to increase of10,866 the analysis. coverage 27.5 This and participation. is2,309 particularly 11.9 Ltrue ast year, since for the had by employees pension income for periods from extending an employer-sponsored to the terminaplan: tion of56covered percentemployment of married or the$1-4,999 Congress may be considering, 10,014but we are pleased 2,433 to make available 358 to you immediately spent, then it would decrease Statement retirement on income. If "portability" $5,000 $9,999 $19,999 $20,000 500 or more employees 23,869 67.0 3,314 18.3 Total 40,702 I00.0 20,894 I00.0 $5,000-9,999 15,323 5,747 2,023 Total Retirement 40,702 I00.0 Income Policy 20,894 I00.0 tax Civili treatment an Employment of these programs98,964 at the individual 51,530 level is identical 24,095 in both example, couples beyond? and the Committee had Congress Program pensionall enacted coverage income--38 the pertinent themayRetirement percent notfacts bewith that Equity as private important mayAct bearpension, (REA), oninyour both which 21 decisions. percent cases. reduced with the The allows $10,000-14,999 the individual to take17,827 cash out from a 10,328 defined benefit plan5,484 and invest TOTAL RECIPIENTS a 6,594 5,533 583 218 154 Retirement Income Policy AGE (All employees & self- 100.00% 52.07% 24.35% UNION STATUS $15,000-19,999 13,101 9,422 5,874 (000's) Before the A national policy that redefines itself to be a national retirement income public Lessemployed) than and 35private settings. 14,588 35.8 9,095 43.5 public percentage age for Unionpension; participation of retirees and with 42 from percent 1monthly 525 ,223 to 21, of pension 38.2and unmarried income the 2,163 agebeneficiaries isfor onlycounting 10.6 relevanthad service to pension judging for the funds, later realizing poor investment returns, the same may be true. On $20,000-24,999 10,283 8,159 5,641 Before the Percent Distribution a 100.0% 84.2% 8.9% 3.3% 2.3% Nonunion 24,627 61.8 18,155 89.4 35 and over 26,133 64.2 11,800 56.5 ....................................................................................... U.S. Senate Committee on Aging Total 40,702 I00.0 20,894 i00.0 Total policy, the Nonagricultural retirement rather than incentive, Wage a retirement 40, not 702 88,214 the andsai00.0 savings vings incentive, 49,530 policy, 20,894would whichdemand 22,217 can i00.0be manyserved changesby vesting income--2 the In other an 7from percent April hand,22 1985 higher with to survey 18. priv investment ateEBRI conducted pension estimates returns and by 16 Hamilton would percent that increase and these withStaff, public changes retirement 58pension. percent increased income. of $25,000-29,999 5,515 4,365 3,048 ALL USES b 100.0% 100.0% 100.0% 100.0% 100.0% U.S. Senate Committee on Aging and Salary Workers 100.00% 56.15% 25.19% $30,000-50,000 6,611 5,547 4,071 EARNINGS d Hearings on HOURS in the rules. But, the first question is whether this fundamental change is The role of employers in providing pensions has increased dramatically, participation distribution prior by 530,000 to retirement. workers--or Deb about atesI of percent--and the recentincreased past have vesting assumed by But full-time in that workers case rated you're the betting existence that ofthea average pension plan individual at workwill as being be able "very to $50,000 Less than and $I0,0OO over 4,101,615 7 10.4 6,711 1,371 34.6 1,106 Total Saving 32.0% Hearings 26.0% on 5/.6% 78.9% 87.3% Less than 2000 7,525 18.5 5,481 26.2 Nonagricultural Wage 68,252 42,463 20,934 $I0,000 to $24,999 24,545 62.1 10,374 53.5 Not reported 7,924 2,158 1,105 "The Pension Gamble: Who Wins? Who Loses?" merited and desired. 2000 especially that andFand o $25,000 retirement Salary r the overin orWorkers "newly more theincome aftermath retired" is 33,176 the 10,866 100.00% couple of primary Worldin 281.5 7objective. .5 War 1981,II. 62.21% in2,309 15,413 cTwenty-five aThus, ses where theIi "Retirement 930.67% only thousand 73.8 the husband private Equity 300,000--or important." about Only 15 I percent. percent ofInthose short,polled only felt 5.6 percent that Social of the Security 9.5 million would outperform the experienced money managers retained by pension plans. "The Pension Gamble: Who Wins? Who Loses?" Retirement Program 4.4 2.4 * _ Total 40,702 i00.0 20,894 i00 0 Total 40,702 i00.O 20,894 IO0.0 age 25 to 64 only Percentage Distribution Within Earnings Group Insurance Annuity _ * _ _ * June 14, 1985 employer-sponsored Act." workers receivesYet, between a benefit, with the earlier retirement ages the participation, average of income 21 and Social and 25 vesting, capital worked Securityfor aand ccumul check employers aation higher was progr $671 cash withamsper out plans existed month; limit, and be Nonagricultural a major source Wage of retirement 61,586 income. Sixty-four 40,702 percent20,476 believed they Employment % Covered % Vested HousingAGE Purchase i0.i June 9.314, 198512.5 _ * SEX and Salary Workers 100.00% 66.09% 33.25% to Employed to Employed Other Investment Less than 35 16.814,588 14.0 35of .8 29.9 9,095 45.9 43 5 -end- Women in worked retirement 1950 at withleast income accumulated 1,000might hours assets 16,335 actually per ofyear $12.7 40.1 and bebillion. had reduced been 9,932 The onasparticipation thecash job47.5 for preretirement one rateyear. for those would age 25with have to 64, pensions enough workingmoney receivedin anretirement, additional though $656. most When both of these the husband apparently and Second, 35 and over would portability26,133discourage 64.2 plan 11,800 sponsorship? 56 5Probably not, if of Meni000Total hours or more 24,367 40,702 I00.0 59.9 20,894 10,963 I00.0 52.5 Total 100.00% 56.15% 32.52% Total Consumption 71.4% 76.6% 51.9% 42.6% * Dallas L. Salisbury Total nonagricultural the distributions ERISAwife Workreceived Force increase. wagebenefits, and salary For 40,702 the savings 54,363 workers monthly plans, I00.0 was Social 25is 38,057 percent. Security it20,894 equitable checkthat 20,02 I00.0 rosean 7 toindividual $836 and The believed improvements that employer-sponsored from REA are real, pensions but such would minimum enablestandard them tochanges achieve arethat no it simply took the form of requiring cash distributions. If, on the other Car Purchase 4.8 4.8 * _ Dallas L. Salisbury HOURS (age 25 to 64, working 100.00% 70.01% 36.84% Vacation 3.2 3.1 _ * $1-4,999 I00.00 President 24.29 3.57 Less than 2000 7,525 18.5 5,481 26.2 TENURE e go the repl can 100D al.acement pension quit hours Whenandasked or for income take more, increases if the rose they onemoney, towould in $899. coverage while have The anenough through ongoing pension to new retire employee income planwith was creation can't agreater reduced haveamong access than pension, small the to hand, it involved creating a new portability agency to be financed by plan President Other$5,000-9,999 Use 63.4 I00.00 68.7 40.9 37.51 * 13.20"_ 2000 and over 33,176 81.5 15,413 73.8 Less than 5 years 10,613 28.0 8,328 51.3 year of tenure or more) Total 40,702 i00.0 20,894 I00.0 $10,000-14,999 I00.00 57.93 30.76 Employee Benefit Research Institute 5businesses. the to Over 9funds years in 800,000 an emergency? private 9,7Does 34employer-sponsored equity 25.7 dictate 3,958 tharetirement t even in24.4 aand savings capital plan asset only 24 income, percentwhich answered added $539 "yes."per month. A full 82 percent of employees agreed with sponsors, it might discourage pension plans, particularly among small $15,000-19,999 EmployeeI00.00 Benefit Research 71.92 Institute 44.83 a Recipients by lump sum amount are less than total recipients and SEX Ten years and over 17,518 46.3 3,830 23.6 1979 $20,000-24,999 percentages are less than I00.00 I00 percent because79.34of the omission 54.85 of "don't Women 16,335 40.1 9,932 47.5 Total accumulation plans exist 38,01 today 7 with I00.0 accumulated 16,116 assets I00.0 exceeding $925 employers. the all statement the money that: that goes "If inemployers stays indid until not some provide common benefits, point in thetime? government These know" and "no response" to the survey question on the value of the Men 24,367 59.9 10,963 52 5 Civilian Employment 95,372 53,445 22,633 $25,000-29,999 lump-sum distribution. i00.00 79.14 55.26 Total 40,702 i00.0 20,894 I00 0 Who is covered? billion. As these Werestaprivate tistics pension indicate,plantheassets retirement to grow and at capital the same accumulation rate as they plan aIncludes would are notendsimple workers up paying." questions, with no The but coverage, answers they need workers to tothese bewhoanswered survey do notbefore questions know more whether reflect changes theythe in (All employees & self- 100.00% 56.04% 23.73% $30,000-50,000 I00.00 83.91 61.57 b Percentages may add to over i00 percent because recipients may have used have coverage and workers with no coverage information reported. TENURE e employed) $50,000 and over I00.00 84.90 68.50 lump sum distribution in more than one way. have the law sinceare1968, made which that further is highlyconfuse questionable objectives. for a Asnumber noted,of over reasons, time, they the importance system Forty-nine Less has thanof 5grown employer-sponsored years millionsignific of 88 10,613 antly million pensions over 28.0 nonagricultural the to thepast 8,328 American 35wageyears worker--and 51and 3 salary in te_ms why workers this of Third, would portability increase or decrease system costs? If employees NotNumber reported of workers too smalli00. for 00 rates to be calc 27.23 ulated reliably. 13.94 5 to 9 years 9,734 25.7 3,958 24 4 bpercentages exclude 12.7 percent of employees for whom firm size is not Nonagricultural Wage 85,181 52,019 21,399 Ten years and over 17,518 46.3 3,830 23 6 known. Con_ittee is concerned about them. would Retirement reach Equity $7.5 trillion Act willby lead the year to millions 2000, according of additional to some small very rough cash participants, simply were covered paid by cash assets, employer-sponsored or benefit were required recipiency, programs to and rollinbenefit over May ofcash amounts. 1983 distributions (56 percent). toMost an and Salary Workers 100.00% 61.07% 25.12% Percentage Distribution Across Earnings Groups a Total 38,017 i00.0 16,116 i00 0 ............................................................................ ........................................................................... % Employ- % of % of Total CIncl estimates distributions covered udes workers workers by EBRI. thatwho earnwill Tod are relatively ay,benotthere spent. covered modest is Is anbythat additional salaries. a union what Congress contract, $300 Over billion 76 actu workers percent ally in assets wanted whoof doall in to existing Nonagricultural financialWage intermediary,63,201total system42,576 costs could remain 19,836 relatively aIncludes workers with no coverage, workers who do not know whether they ment Coverage Vesting not know whether they are covered under a union contract, and workers with no have coverage and workers with no coverage information reported. and Salary Workers 100.00% 67.37% 31.39% reported state do? Isand inf that olocal rmation "Retirement plans, on unionization. which Equity?" could grow to $2.7 trillion by the year 2000, How covered The is the system employees systemof chan_inK? and employer-sponsored 70 percent of pensions all vestedis employees becoming increasingly earned less more than stable and simplification would be achieved. If a new agency were formed, as age 25 to 64 only Total 100.00% 100.00% 100.00% bpercentages exclude 12.2 percent of employees for whom firm size is not Nonagricultural Wage 58,009 40,830 19,522 known. dpercentages againTheaccording absolute exclude to number our4.4very of percent workers rough covered estim of aemployees tes.by pensions The whose coverhas ageearnings continued rate for areto privgrow, not ate important some $25,000havea to yeproposed, artheinpro 1983 vision and (seeemployers of Table retirement I). have income to transfer nationwide.values I choose in and the outterm of and Salary Workers 100.00% 70.39% 33.65% $1-4,999 12.47 5.14 1.30 reported. age 25 to 64, working CIncludes workers who are not covered by a union contract, workers who do $5,000-9,999 19.08 12.13 7.33 Conclusion nonagricultural wage and salary workers is 50 percent (see Chart I) and over but "employer-sponsored" due to the large quite number deliberately, of new jobs being becausecreated from abypolicy small businesses, standpoint, the the defined I000nothours know benefit whether or more plans, they areexperience covered underindic a autes nion contract, that cost and workers and complexity with no would $10,000-14,999 22.20 21.80 19.87 The views expressed in this statement are solely those of the author and eTotal excludes 11.2 percent of employees who have worked at their current reported information on unionization. ERISA Work Force 49,736 36,890 18,941 The should $15,000-19,999 viewsnot expressed be attributed in thisto16.32 statement the Employee are solely Benefit 19.89 those Researchof the Institute, 21.28 author and its job 80 for percent Whenlessone for thanconsiders public-sector one year,those doesn't employees. thatinclude ERISA drequired /r. to be included in employer rise stateCongress significantly. and local has government provided incentives is an employer for retirement that providesand benefits capital accumulation in much the percentage of the total work force covered by plans has declined. The primary (age 25 to 64, working 100.00% 74.17% 38.08% officers, $20,000-24,999 trustees, sponsors, 12.81 or other staff. 17.22 The Employee Benefit 20.43 Research should not be attributed to the Employee Benefit Research Institute, its dpercentages exclude 4.4 percent of employees whose earnings are not I000 hours or more, one officers, Institute reported.trustees, is a nonprofit, sponsors, nonpartisan or otherpublic staff.policy The research Employee organization. Benefit Research SOURCE: Preliminary tabulations of EBRI/HHS May 1983 CPS pension supplement. re same plans--i.e., programs ason: way for small as private-sector those over business 60 between years. does the employers. The not agesincentives provide of 25Granted, and pension have 64 working the worked coverage law 1,000 well with at in hours which theboth high per youareas. ryear a are te year of tenure or more) $25,000-29,999 6.87 9.21 11.04 Institute is a nonprofit, nonpartisan public policy research organization. eTotal excludes 11.2 percent of employees who have worked at their current $30,000-50,000 8.23 11.71 14.75 In 1950, the percentage of retirees receiving pension income was found Congress and job on in for theshould less large jobthan at businesses not one least year, overlook one doesn't (see year--the the incl Chart ulong de dbase 2). /r.history drops If this of to does incentives 54 million not change, workers, for income then of SOURCE: Preliminary Employee Benefit Research Institute tabulations of $50,000 and over 2.01 2.89 4.01 06/11/85 the May 1983 EBRI/HHS CPS pension supplement and May 1979 SOURCE: Preliminary tabulations of EBRI/HHS May 1983 CPS pension supplement. negligible. By 1962, 16 percent of retired married couples and 5 percent of DOL/SSA CPS pension supplement. 06/11/85 06SOURCE: /11/85 Preliminary Employee Benefit Research Institute tabulations of 06/11/85 06 06 06///11 11 11///85 85 85 06 06//11 11//85 85 06/11/85 o6,,11/85 EMPLOYEE BENEFIT RESEARCH INSTITUTE the _ay 1983 EBRI/HHS CPS pension supplement. 06111/85 2121 K _trcct, N\V ,'quite _b0 \\ashington, [)t 2007,7 [eh.'phonc (202) b5'4-0670 a Percentages exclude 9.0_ of employees whose ea_ings are not reported.