This Issue Brief presents
data on the number and amounts of lump-sum total
distributions made from retirement programs and also on
the number and amounts of rollover contributions made to
individual retirement accounts (IRAs) for the years
1987-1990. It also discusses the implications of workers'
rollover decisions for retirement income security and the
legislative history of benefit preservation.
The number of lump-sum total
distributions rose from 11.4 million in 1987 to 12.2
million in 1988 and then declined to 10.8 million in
1990. While the number of distributions declined over
this period, the amount distributed increased steadily
from $80.3 billion in 1987 to $125.8 billion in 1990. By
comparison, retirement benefit annuity payments from
employment-based plans totaled $197 billion in 1987 and
$234 billion in 1990.
While 61 percent of all 1990
distributions were premature, i.e., they occurred before
the recipients reached age 59 1/2, 38 percent of all
funds distributed were from a premature distribution.
Normal distributions, i.e., those made to recipients who
were at least aged 59 1/2, accounted for 25 percent of
all distributions and 34 percent of all funds distributed
in 1990.
Twenty-nine out of every 100
lump-sum total distributions in 1990 resulted in an IRA
rollover contribution, indicating that more than 70
percent of all distributions were not even partially
rolled over into an IRA in that year. Focusing on the
funds involved, 57 percent of all money distributed in a
lump-sum total distribution was rolled over into IRAs.
More and better data are needed to
fully assess the preservation issue. To the extent we are
better able to gauge the perceptions and expectations of
distribution recipients, a clearer picture emerges as to
the extent that distributions are being preserved,
invested in other ways, used for consumption in hard
times, or used simply for current gratification. Whether
a lack of preservation is due to shortsightedness or
current hardship, it may be at the expense of future
retirement income security. A deeper understanding of
these issues is needed for informed policy decisions
