Mandatory private pension plans, an increase in the retirement age and tax incentives to increase individual savings have been recommended as part of the interim report of the President's Commission on Pension Policy.
The preliminary conclusions of the blue-ribbon panel, charged with creating a national retirement-income policy, were revealed yesterday by commission member William C. Greenough at a convention of pension industry executives.
The Association of Private Pension and Welfare Plans immediately declared its opposition to any kind of federally mandated pension plans in the private sector.
The commission based its recommendations, in part, on a poll showing workers are covered by pension plans and that six out of 10 workers think their projected retirement income won't be adequate.
The commissioners reached eight principal conclusions, the first of which is that the country should try to provide all Americans with an adequate retirement income. The goal is to allow retirees to continue their preretirement standard of living through a combination of five income-producing sources: universal Social Security coverage, mandatory employer-provided pensions, livable minimum benefits for those not covered by these two systems, individual savings encouraged by tax incentives and postretirement work when desired.
The commission recommends consideration of ways to raise the normal retirement age, such as by having workers earn one year of retirement pay for every three they worked after age 21. This would mean workers would have to wait until around age 67 or 68 before they could receive full retirement benefits.
Individuals should be allowed tax deductions or credits for retirement savings just as if they were in a structured pension plan, the commission said. Social Security contributions should be made with pretax dollars, whereas benefits should be taxed the same as other pension benefits, it added. The commission is leaning toward allowing retired people to earn as much as they can, provided Social Security benefits are taxed, the report states.
On "double dipping" -- collecting a pension while working at another job, a major issue when President Carter announced formation of the advisory group -- the commission has recommended severe curbs on disability payments.
As a means of encouraging a person to return to the workforce, his or her total benefits would be reduced by the amount of the disability payment.
For example, if a policeman earned $1,000 a month before going out on a $500 a month disability pension and then got another job paying $700 a month, his disability would then be reduced to $300 a month.
Other recommendations include earlier vesting, encouraging employes to accept reduced initial retirement benefits in exchange for cost-of-living adjustments on privte pensions, and better treatment of spouses' pension rights. For example, the widow of a worker who died before retirement age would be able to collect a portion of her husband's retirement pay. Pensions would be defined as property rights, and divorced spouses would be entitled to a prorated portion of the benefits earned by their spouses during the marriage.
In their report, the commissioners carefully hedged their language and stressed that their conclusions are tentative. Also it was noted that their ideas are based on the assumption of a strong economy, not present economic conditions. They also admitted that some of their recommendations might not be feasible from a cost viewpoint.
The commission, which is headed by Xerox Corporation Chairman Peter McColough is scheduled to present its final report to the president in February 1981. Its work represents the most thorough look at pension systems since World War II.