The Greening of America is giving way to the graying of America. The Black Panthers have been supplanted in the news by the Gray Panthers.
The 1960s youth revolution symbolized by Charles Reich's book is over. Erstwhile revolutionaries have not only become conservatives, they're older. And so is the rest of the country.
In 1970 the median age was 28; today it is 29.4. By the year 2000, it will be 35.5 years. In 1776 only 2 per cent of the population was over 65. Two hundred years later, 10.5 per cent or 23 million persons, were. And in 2030, one American in five will be over 65.
As the number of older persons increases, so does interest in - and lobbying for - subjects of their concern, not the least of which is retirement and the quest for sufficient funds to enjoy it.
Congress has passed landmark age related legislation beginning with Medicare in 1965, the Employee Retirement Income Security Act of 1974, and more recently, the Social Security assistance bill and the 1977 Age Act, which raised the mandatory retirement age in the private sector from 65 to 70. In September, California went a step further than the federal government and banned mandatory retirement at any age, an act that portends the future.
But early retirement is still the rule in U.S. industry today. For example, 89 per cent of Ford and General Motors workers retire before age 65. In white collar jobs, workers tend to stay later. At General Foods, for instance, only 70 per cent retire early.
The Bureau of Labor Statistics estimated in 1967 that one in three persons of those competent and willing to continue working after age 65 would elect to do so. By all accounts, that number would be small, and so would its impact on pension funding, according to the American Association of Retired Persons.
Demographic and social changes, especially in times of economic adversity like the last recession, coupled with legislation pushed by senior citizens' groups, have resulted in a new awareness of retirement and pension issues even more among the young.
A September poll by the Conference Board revealed that today's affluent youth under 25 opposes mandatory retirement at any age, as does nearly two-thirds of the population at large. A decade ago youth's talk was of dropping out.
Last month the proposal to integrate federal employees into the Social Security System was bitterly - and successfully - opposed by unions representing mainly young workers. They feared their benefits would be reduced under universal coverage.
A survey published in October by the Bureau of National Affairs documents the increased awareness of employees and unions to pension issues. Personnel officers at 163 manufacturing and service industries reported that employees were asking more question and requesting more information on vesting, payment options and estimates of expected benefits.
The personnel officer at a Northern medical center said, "Younger employees display a concern for pension eligibility whereas years ago they were not aware or concerned."
Nearly two-thirds of those polled by Unidex Research earlier this year knew what IRAs were and found the concept appealing.
The disclosure requirements of ERISA have caused confusion as participants struggle to understand summary annual reports sent them by their bosses. But they have also spawned interest and, often, understanding of what poor deals some employees getting.
A representative of a Southern engineering company told BNA. "There is an increased interest in Individual Retirement Accounts. Many employees would choose to drop the company plan and join IRA."
Under ERISA, no active plan participant can also contribute to an IRA. By including an opt-out waiver in their contracts, a few pension plans have begun to free employees to establish IRAs. The IRS approves such moves provided the remaining company plan is not discriminatory, i.e. all the high paid employees don't leave it, and between 70 and 80 per cent of the employees are still covered.
At Dynell Electronics Corp. on Long Island, 5 per cent of the 600 employees have opted out this year. They are primarily professionals, such as engineers, who do not stay on one job long enough to vest, and young people who can contribute more to an IRA, if they wish, than their employer does to the company fund.
Use of the opt-out waiver has not become widespread, according to pension consultants, because not many employers know about it or are willing to admit that their employees might want out of the company plan. Those with plans requring 10 years to vest are not willing to go to the expense of drafting a new plan when it brings them no financial advantage. But the biggest drawback is lack of employer protection in the form of government regulations against employees who not fully understanding the waiver or not being provident, could sue the employer if they get no benefits at all upon retirement.
In collective bargaining, unions seem to be more concerned with pension benefits than in the past when the focus of negotiations tended to be on the more visible weekly paycheck.
ERISA did not make plans or benefits mandatory, but set stricter rules for existing and new plans. Since its passage in 1974, it has wrought considerable changes in the pension system; most of them, but not all, are favorable.
In 1973, for example, 87 per cent of the companies responding to the BNA survey provided retirement benefits. In 1977, that figure dropped to 80 per cent. (In some cases, URAs have been substituted with the employer's blessing). On the other hand, 86 percent of the plans provided for full vesting of employee pension rights in 10 years or less (a decade is the ERISA minimum), compared with 38 per cent in 1973.
The defined benefit plan, under which the employer guarantees how much a worker will get at retirement, is slowly giving way to the defined contribution plan, such as profit-sharing, where the employer puts up a certain sum now, gambling that it will grow to provide sufficient retirement benefits. Employee stock ownership plans are also gaining popularity, as are other types of combined plans.
Collectively, pension funds are assuming a more important economic, as well as social, role in American society. With over $250 billion in assets, the funds influence stock market prices, build real estate empires, and occasionally play a political role, such as the decision by the New York City teachers' fund to help bail the Big Apple out of its financial bind in 1975.
Recognizing the power - as well as the weaknesses - of pension funds, President Carter announced some months ago the creating of a blue ribbon commission on retirement to take a broad look at private plans and government pension systems at local, state and federal levels, and the relationship between Social Security and the private system.
According to White House sources, the only person now being considered to head that commission is Charles Kirbo, an Atlanta attorney and personal friend of Jimmy Carter.
The House has a pension task force at work to recommend whether, eventually, government pensions should be brought under the same stringent rules governing the private system.
As the New York City situation revealed, many municipal plans are underfunded and overpromised. The task force found that full one-third of state and local systesm are on a "pay-as-you-go basis, and that two-thirds of them do not know or disclose the market value of their assets.
Sen. Jacob Javits (R-N.Y.), one of the authors of ERISA, has called for a comprehensive national policy on retirement. He envisages coordination of public and private pension systems, perhaps including Social Security. He even suggests that federal plans be established for small companies that cannot afford to run their own plans.
Such a policy, he maintains, could deal with the related problems of capital shortages and over concentration of capital holdings in blue chips stocks by institutional investors. Critics have decried javits' proposal as the first step toward nationalization of the private pension system.
What seems likely in the future is the gradual melding or integration of public and private systems. In 1970 the employer's contribution to Social Security was 4.8 per cent. Recent House action raised that percentage to 6.05 in 1978 and 7.0 in 1986.
Because Social Security taxes are dictated by law, but private plan contributions are not, the trend is for hard-pressed employers in the private sector to fit their own plans to avoid duplication of costs for benefits already provided under Social Security. (In 1974 between a quarter and a third of all plans were integrated.)
However, integration could well reduce benefits for the rank and file, since employers will have more leeway to sweeten their benefits for high-paid executives. There will be a tendency to let Uncle Sam take care of Joe and Willie. On the other hand, the House also voted to eliminate the ceiling on the amount of income of retiree can earn and still collect Social Security benefits. So old persons may in the end come to depend on their own savings and resources, as they have done for centuries
While the post-ERISA pension situation has imporved - the Pension Benefit Guaranty Corp., for example, covers 15,000 workers who would otherwise have little or no benefits - there are still many gaps to be filled.
Reorganizing that ERISA does not restore benefits retroactively, Sen. Javits has proposed a Pension Claims Review Board. This would help those retirees who are unable to afford lawyers to sue their former employers. Another idea, proposed by actuary Paul Jackson of the Wyatt Co., is that the proceeds of a corporate income tax of 0.1 per cent be used to provide benefits to those who would otherwise be deprived.
Even in the post-ERISA era, half of the America private work force is still without pensions, notes Karen W. Ferguson, director of the Pension Rights Center, a Nader organization. And possibly half of those who have pension plans will receive no benefits due to business mergers, failures, plan terminations, or their own inability to qualify under plan regulations.
She told a congressional oversight hearing this fall, "The fact is that most Americans working today assume that they will be taken care of in retirement. After all, why else have they been paying ito Social Security all these years? If they are aware of the need for a supplement to Social Security, they tend to assume that they will have it either in the form of savings or a pension.
"It is only when they retire that they discover that Social Security payments (amounting now to less than $3,000 a year) are not enough to live on, that their savings amount to practically nothing, and that they have no pension or a very small one. At that point there is nothing they can do to protect themselves," she said.
The mobility of the American population appears to be maintained at the expense of pension rights. In 1973, the Bureau of Labor Statistics reported that half of all the workers covered by private pension plans had been at their present job nine years or less. The figures for women were much lower. In 1973, just over a third of company plans provided vesting in 10 years or less; in 13 per cent of the plans studied, workers had to put in 20 or 25 years service to be entitled to collect retirement benefits.
Today, some firms have switched to phased vesting, such as 50 per cent vesting after five years with an additional 10 per cent each year, or 20 per cent after two years. ERISA reformers would change its present 10-year vesting rule to five years, consistent with European systems.
Another target for improvement is portability, or the transfer of accrued pension benefits from one employer to another. Ferguson suggests that an employer be required, if the worker wishes, to provide a statement at the employee's termination of how much his vested benefits would come to at retirement and the discounted amount he could roll over into an IRA.
The Limited Employee Retirement Account is a concept to aid those who are not fully covered by company plans, but who are not eligible to set up IRAs because they get some employer coverage. It also aids workers whoe employers refuse to include opt-out waivers in their plans. Many employees wish to supplement company plans because they feel their benefits may be inadequate or because they cannot stay on one job long enough to qualify. Also, some wish to manage the investment of their retirement funds themselves as IRA holders can.
LERA, the brainchild of the engineering profession, remains a concept not a reality. During the past year, its enabling legislation has crept along in both houses of Congress, but passage seems unlikely this session.
A major striking point is the $400 million tax deferred revenues the Treasury would lose annually if individuals were allowed to supplement their employers' plans. It is estimated that about half a million persons could benefit from LERA.
Also on the pension scene this year: continued simplification of filing forms which was promised by Labor Secretary Ray Marshall. In September he announced consolidation of the annual reports to pension agencies into one document. Although pension managers, not individuals, must cope with the extensive ERISA paperwork, it affects participants through plan terminations.
A recent study by the House Small Business Committee revealed that for nearly 30 per cent of the small plans surveyed, ERISA was the only reason for termination; another 39 per cent reported that the pension law had a "substantial" effect on the decision to end plans. Firms reported that ERISA's paperwork boosted startup and administrative cost two to three times over the pre-ERISA costs.