A change of tremendous importance is on the horizon for women who are earning pensions. The change will raise their monthly income when they retire, at no added cost to themselves.
This hope stems from a 1978 Supreme Court decision, known as the Manhart decision. It said that, in companies where employes contribute to their pension plans, women should not have to pay any more than men for the same benefit.
At the time, the pension industry dismissed this decision as of small importance. There are not many pension plans that require women to pay more than men.
But there are a lot of plans that discriminate at the other end of the pension transaction. Both men and women pay the same amount into the plan (or the company pays for them), yet men get higher monthly benefits at retirement.
The ripples of the Manhart decision are now reaching this second group of plans, as well. Nothing is apt to change for women who have already retired. But future female retirees should, within just a few years, find themselves in a better position.
Behind the traditional form of pension discrimination lies the mortality table. On average, women in the United States today live longer than men. That means that their pensions have to last longer, too. Given a fixed number of dollars to work with, women's monthly payments must be smaller than men's if those fixed dollars are to last an average lifetime. This apparently immutable principle lay unquestioned for many years.
Finally, someone questioned it -- and the Manhart decision gave the answer.
The court decided that the pension plan under review illegally discriminated against individual women, by ascribing to them the general characteristics of their group. It's true that "on average" women are now living longer than men. But that may or may not be true for any woman in particular. In fact, more than 80 percent of women die no later, or sooner, than men. Said the Supreme Court.
"Even a true generalization about the class is an insufficient reason for treating differently an individual to whom the generalization does not apply." Hence, forcing all women to pay more for their pension plans is illegal discriminatgion based on sex. Companies should, instead, merge the mortality experience of the male and female employes and charge them both the same.
After the Manhart decision, things began to happen. Female employes sued in court for equal benefits under other types of pension plans. The Equal Employment Opportunity Commission (which took a position against pension discrimination back in 1972) got into the act. The Labor Department proposed amending the guidelines to the Equal Pay Act, to require equal pension contributions for men and women making the same salaries, and equal pensions at retirement.
That guideline isn't yet in effect, but the handwriting is on the wall. "The way federal law and guidelines are being written, we think that a combined male-female mortality table will be require for all employer-sponsored benefit programs," William Slater, senior vice president of Teachers Insurance and Annuity Association-College Retirement Equities Fund told my associate, Virginia Wilson.
Such a change also could affect spousal benefits in pension plans that otherwise do not discriminate between male and female employes.
TIAA-CREF is the first major insurer to introduce a unisex mortality table. It's now up for approval before the New York State Insurance Department.
But the company and Eeoc are still arguing over one key point. THE EEOC wants to apply the unisex pension tables retroactively, so that all new male and female retirees will be treated alike. TIAA-CREF, on the other hand, want past payments into the plan to stay on the books at the old rates, with the new unisex table applied only to future payments. Under this approach, equal pensions would be phased in over a long period of time.
As usual, putting an end to discrimination has its costs. A unisex mortality table provides larger pension benefits for women then they otherwise would have had but smaller benefits for men.
But unisex tables are a double-edged sword. When applied to life insurance -- which is the next step -- t he equality principle means that women might have to pay a little more for their coverage, and men a little less.