« PreviousContinue »
Wage Structure: Electric and Gas Utilities, September 1957
Employers were not limited to reporting actual expenditures data. In the absence of expenditures records, they were requested, where possible, to provide estimates. As a result, four types of figures were provided consisting of actual or estimated data relating either to all workers or to nonsupervisory workers as shown in the following tabulation:
Comparisons of data based on estimated figures with those based on actual records showed relatively slight and inconsistent differences for the items studied. The inclusion of estimated figures are believed to have produced no appreciable changes in the survey results. Similarly, the inclusion of expenditures data relating to all workers does not appear to have changed final results significantly. Median employer expenditures based on all-worker data were similar to those based on nonsupervisory workers for most of the items studied as shown below:
1 More than half of the companies reporting on an "all worker" basis had no ere penditure for this item,
The computation of median employer expenditures includes data for all systems reporting including those having no expenditures for the selected benefits. "
The similarity in the expenditures reported for all workers and for nonsupervisory workers can be attributed to several causes. The number of super visory workers is relatively small. Furthermore, the differences in benefits for these two groups, even if moderately large in dollar terms would be less apparent on a percentage basis, since the volume of benefits is scaled essentially to the level of earnings.
For many of the selected supplementary benefits studied there was a wide range in expenditure levels among employers. The following tabulation indicates the median system expenditure for each item, "2 the range of expenditures for the middle half of the systems, and the range for the middle four-fifths:
The total number of utility systems reporting expenditures data was somewhat less than the 226 providing earnings information and varied slightly according to the selected items, because of variations among the systems in their abilities to provide the requested information.
11 This procedure is in contrast with the 1953 study, Problems in Measurement of Expenditures on Selected Items of Supplementary Employee Remuneration (BLS Bull. 1186). That study limited the computation of average expenditur es to establishments having some expenditures for the benefits.
12 The me dian expenditure is the value above and below which half the employer expenditures were found. This measure was used to reduce the influence of possible reporting errors. The calculation of an employeeweighted mean was made difficult by the nonresponse of a number of large employers.
Characteristics of Pension Plans
An Analysis of the Principal Provisions
WALTER W. KOLODRUBETZ*
THE PRIMARY PURPOSE of a pension plan is to provide an income for life to workers who retire. Despite this common basic purpose, pension plans still a relatively new development insofar as many wage earners are concerned-differ widely in their rules, requirements, and benefits. They are subject to modification as conditions change, particularly if they come within the area of collective bargaining. Although pension plans may not change as frequently as health and insurance plans, which are essentially short-term commitments, or other provisions of collective bar gaining agreements, bargaining experience of recent years, and changes in the Social Security Act which stimulate adjustments in private plans, have demonstrated that pension plans, too, must be considered as fluid rather than static programs.
Scope of Plans
The 100 pension plans studied included plans established for the first time as the result of collective bargaining and plans established originally by either the employer or the union but since brought within the scope of the agreement, at least to the extent that the agreement established employer responsibility to continue or provide certain benefits. The number of workers covered by each plan ranged from about a thousand to several hundred thousand. In total, about 3.3 million workers under collective bargaining' were covered, or roughly a third of the estimated number of workers covered by all pension plans under collective bargaining. Sixty-six of the plans were in effect in manufacturing industries (covering approximately 2.1 million workers) and 34 in nonmanufacturing industries (covering approximately 1.2 million workers). Sixty-one plans were restricted to single companies and covered slightly over 1.7 million workers. Multiemployer programs accounted for the remaining 39 plans but covered almost as many workers. Eighty-six plans, covering almost 2.9 million workers, were financed solely by the employer (noncontributory plans): Fourteen were financed by both the employer and employee (contributory plans).
of the Division of Wages and Industrial Relations, Bureau of Laber Statistics.
1 Digest of One Hundred Selected Pension Plans Under Collective Bar. galning, Winter 1987-88, BLS Bull. 1232.
Many plans were extended uniformly to cover workers outside the scope of the collective bargaining agreement. However, the coverage figures used represent only the number of workers under collective bargaining agreements covered by the plans.
* Three such plans gave the workers an option to contribute to a supple mentary plan to build up additional benefits. Two other plans provided the workers an option to contribute to another plan which was in Mon of the baste noncontributory pension. In these cases, only the basie noDOORtributory plans were analyzed.
845 UNITED STATES DEPARTMENT OF LABOR
BUREAU OF LABOR STATISTICS
This article describes the principal features of pension plans under collective bargaining as of late 1957 and early 1958. It is based upon & digest of 100 selected plans recently completed by the U. S. Department of Labor's Bureau of Labor Statistics.' The plans were selected because they covered large numbers of workers in major industries, or illustrated different approaches to pension planning, or because of widespread public interest as manifested in inquiries received by the Bureau. Though the plans were not selected as typical or model plans or as a representative sample of all plans under collective bargaining, their provisions illustrate the scope, substance, and variety of pension plans currently in effect.
From the Monthly Labor Review, August 1958 Reprint No. 2288
Participation in a pension plan is not necessarily automatic for the newly hired worker. In order to participate in a pension plan, that is, build up credits toward retirement, the employee may be required to complete a specified period of employment, reach a certain age, or both. Over onefourth of the 100 plans studied contained such provisions (almost all of the contributory plans and about a sixth of the noncontributory plans). The minimum service and age requirements found generally ranged from less than 1 year to 5 years of service and from 25 to 35 years of age. In the absence of such requirements, the worker is eligible to join the plan upon employment or shortly thereafter.
In addition to minimum participation requirements, a plan may specify an age beyond which the worker cannot join the plan, e. g., age 45. Such a requirement is not common. However, older workers may also be excluded by requiring that the worker must have a certain number of years of service in order to receive benefits and by providing that service cannot be counted for retirement purposes beyond a specified age, e. g., age 68. To illustrate: A plan which required that & worker have 10 years of credited service to qualify for a benefit also specified that service beyond age 68 could not be counted for retirement purposes. As a result, newly hired workers age 58 and over could not join the plan and still qualify for a benefit.
age for women. Specific service requirements had to be met in slightly over three-fourths of the plans. Ten and 15 years of credited service were the most common requirements found. In over two-thirds of the 100 plans, the worker must have been employed for 10 or more years to meet minimum qualifications for normal benefits.
Under early retirement provisions (71 plans), a worker may retire prior to the specified normal retirement age and receive an immediate, but usually reduced, benefit. In contrast to normal retirement, under which retirement is at the option of the worker, early retirement in slightly more than a fourth of these plans was contingent upon the consent of the employer. Age and service requirements for early retirement varied considerably. Age 55 or 60 was the most common minimum age requirement found. In addition, a majority of the plans required the worker to complete 10 or 15 years of credited service in order to qualify.
The purpose of a disability retirement provision (70 plans) is to permit workers who become totally and permanently disabled, and who do not qualify for benefits under the normal or early retirement provisions, to retire on an immediate benefit.* . In comparison to early retirement, less emphasis was placed on age requirements in qualifying for disability benefits. About three-fourths of the plans providing disability retirement did not contain age requirements. However, in comparison, minimum service requirements tended to be higher under disability than under early retirement provisions. In over three-fourths of the plans providing disability retirement, 15 or more years of service were needed.
Types of Benefits
Normal Retirement Benefits
Three types of retirement benefits were provided by the plans studied, although not by each plan: Normal, early, and disability retirement. Under a normal retirement provision, the worker becomes entitled to a benefit, having otherwise qualified, upon reaching the normal retirement age specified in the plan. In general, this is the earliest age at which the qualified worker may choose to retire and receive the full benefit his length of service, amount of earnings, or both, entitles him to under the normal retirement provision of the plan. All plans made provision for normal retirement.
All but 8 specified 65 as the normal retirement age. Seven specified 60, and the other one, age 70. Seven plans provided a lower normal retirement
The amount of monthly pension to which the worker is entitled at normal retirement date is determined by the benefit formula provided in the plan. This formula usually takes into account the worker's earnings, his credited service, or both. A feature which has received considerable emphasis under negotiated pension plans is provision for guaranteed minimum or alternative benefit for
• Plans generally provided that the worker must have been totally disabled for a specified period of time, usually 6 months, before he is eligible to receive a disability retirement benefit. Most plans were very specific with respect to the qualifications and the procedures for determining the worker's original and continued eligibility.
mulas. “Social security offset" provisions in the benefit formulas also affect the amount of retirement income the worker will receive from the plan.
credited service (25 or 30 years), with the benefit reduced proportionately for the worker with less service to a specified minimum, e. g., $110 monthly for 15 years of service.
The third type in which a uniform amount was provided to all workers who completed a specified period of service upon reaching normal retirement age was found in several multiemployer programs. These included plans negotiated by the International Ladies' Garment Workers, the Amalgamated Clothing Workers, and the United Mine Workers (Ind.). Usually, the benefit was exclusive of any primary social security benefit to which the worker would be entitled.
Types of Formulas. Many variations in benefit formulas used to compute normal retirement benefits were found among the 100 plans studied. Most plans fell into 1 of 3 major categories: (1) The benefit varied by earnings and length of credited service in a variety of combinations; (2) the benefit varied by length of credited service alone; or (3) a flat amount was provided to all workers who complete a specified period of service.
About a third of the plans in which the benefit formula was based on earnings and length of credited service used average earnings of the final (or high) 10 (or 5) years of service in computing benefits, while two-thirds used career earnings. Basic steel plans, for example, provided a monthly retirement benefit equal to 1 percent of average monthly earnings during the 120 months immediately preceding retirement multiplied by years of continuous service; the amount was then reduced by a flat $85 for the primary social security benefit under Federal old-age and survivors insurance.
The type of benefit formula in which the amount of benefit varied by length of credited service alone was illustrated by major programs in the automobile industry. These plans provided for a normal pension computed by multiplying a flat sum, e. g., $2.25, by the number of years of credited service. The resulting amount was exclusive of any primary social security benefit the worker received. Some plans of this type specified a maximum number of years of credited service to compute the benefit, e. g., $2.25 times years of credited service to a maximum of 30 years. Another variation was a formula under which a flat amount (e. g., $140 monthly, including primary social security benefits) was provided to the worker who completed a specified period of
Minimum and Alternative Benefit Formulas. Many collectively bargained pension plans guarantee minimum pensions to all workers upon completion of a specified period of service at normal retirement age. 'Among the plans studied, most minimum benefits were provided through a different formula than that which determined basic normal retirement benefits. In some plans, the minimum formula provided a higher benefit to lower earnings groups, while the basic normal retirement formula was effective only for the higher earnings groups.
Among plans which provided & minimum benefit were those in which the basic formula was based on earnings and service, while the minimum was based on length of service alone. Many plans in the basic steel industry, for example, provided, in in addition to addition to the basic normal retirement
the basin nom formula previously cited, a minimum guarantee of $2.50 times years of service after October 31, 1957, and $2.40 prior to that date, up to a maxi. mum of 30 years, with no social security benefit offset. A variation in this type of minimum was found in those plans in which the basic formula was based on earnings and service, but the minimum benefit was a flat amount which did not vary with either length of service or earnings. In other plans, the minimum was sometimes inherent in the basic formula as, for example, in a uniform benefit type of formula or in a benefit formula which took account of service alone and stipulated the minimum service for which & pension would be granted.
The benefit formula specifically includes all or part of the primary benefit received by the worker under Federal old-age and survivors Insurance.
• For minimum benefit provided in these steel plans, see following so tion of this article.
Under current provisions of the Social Security Act, primary benefits are payable to qualified workers at age 66. Women may elect to receive a per. manently reduced primary benefit to begin at age 62. Since July 1, 1957, qualified workers bave been entitled to a disability benent from age 50 to 68, 1 they become disabled as defined in the Social Security Act. When the worker receiving a disability benefit attains ago 66, the disability benefit reverts to a primary benefit.
Adjustment to Social Security Benefits. Private pension plans are generally considered as supplements to Federal old-age and survivors insurance.'