old-age beneficiaries when both husband and wife are considered to be receiving the benefit) are, of course, much better off than those who receive old-age and survivors insurance alone. In the survey of aged beneficiaries receiving old-age and survivors insurance conducted at the end of 1951, it was found that about half of the men drawing private pensions got more, and half got less, than $60 a month from this source. Three-fourths received less than $100 a month and about 10 percent got more than $125 a month.

Table II gives examples of the monthly benefits, OASI plus the private plan supplement, payable under various plans to a man with a $250 average monthly wage at age 65 after 30 years' service. The percentage of the combined payment represented by the private plan supplement is also indicated in the table.

TABLE II.-Examples of monthly benefits payable at age 65 after 30 years' service based on a $250 average monthly wage1

1

In some

Basic

1 The concept of average monthly wage differs among the plans considered. instances the average monthly wage is computed over the most recent or highest 5- or 10-year period, in other cases it is computed over the entire period of employment. figures prepared in the Division of the Actuary, Social Security Administration. 1952.

October

2 The OASL wife's benefits are payable only if the wife is 65 years of age or over. The reference is to the collective-bargaining plan covering production workers. Under present arrangements, combined old-age and survivors insurance and private-plan benefits will, for the $250-a-month man with long service, generally replace from 40 to 60 percent of his previous wage if he is single, and from 55 to 75 percent if he is married and his wife is 65. Private plans are designed as supplements to the public program and would, of course, be inadequate for the average worker if considered alone. Generally speaking, considerably more than half of the combined retirement benefit will come from the Government program. For those with less than 30 years' service, the proportion of combined benefits furnished by the Government program is generally considerably more.

Private plans are adjusted to OASI in various ways. Because OASI pays in relation to the first $3,600 of annual earnings, some private

plans pay a supplementary benefit only on compensation in excess of this amount. Others pay on all compensation, but pay a higher percentage on earnings above $3,600 a year. In many collective-bargaining plans the adjustment is more direct. A given level of combined OASI and supplementary benefit is guaranteed and the private plan pays whatever is necessary to bring the amount up to the guaranty. Under these collective-bargaining plans, as OASI is liberalized the amount payable by the private plan is reduced. This is true also of many employer-sponsored plans as it is quite common to provide for adjustment of the private plan by subtracting the OASI benefit or some portion of the OASI benefit from the amount payable by the company.

In the near future, under a few plans, combined benefits will reach a high percentage of previous wage. The United Mine Workers of America Welfare and Retirement Fund, for example, now pays $100 a month at age 60 after 20 years' service in the coal industry, regardless of the amount of the old-age and survivors insurance benefit. The average miner retiring after September 1952 will have an average monthly wage of about $270. If single, he will receive about $80 from old-age and survivors insurance when 65, and if married, about $120. If the retired married worker receives an additional $100 from the miner's fund, his combined benefit will be somewhat over 80 percent of his previous wage.

Plans such as this one, which do not provide for direct adjustment to OASI can, of course, be modified to take new levels of old-age and survivors insurance benefits into account by a general reduction in the supplementary benefit. The miner's fund provisions, for example, do not give an absolute right to $100 per month plus old-age and survivors insurance.

Although most private plans take into account the fact that the individual will also be receiving benefits under old-age and survivors insurance and in one way or another allow for this fact, the public programs, except for old-age and survivors insurance and railroad retirement, have been largely independent of each other. A person while working for the Federal Government in a civil-service position on permanent appointment is covered only under the Civil Service Retirement System and not under old-age and survivors insurance. The same is true of those covered by most State and local plans and of those who qualify under the plans of the Armed Forces. Thus the benefits of those plans are generally intended to be sufficient in themselves. Even though large numbers of persons, by moving from one type of occupation to another, may become eligible for old-age and survivors insurance and one of these retirement benefits in addition, the benefit structures of those plans are based on the idea that the benefit which they provide is the only one which the individual will receive.

Under these special Government programs the benefits tend to be considerably higher than those under old-age and survivors insurance. Currently, for instance, a retired railroad worker with 30 years' service who has averaged $250 a month gets a monthly benefit of $144.90; if married with a wife age 65 or over, he gets $184.90. The $300-a-month worker with the same length of service would get $165.60 a month; with an entitled wife, $205.60. A Federal civil

servant earning $250 a month with 30 years' service would get $137.50 whether married or not. If he earned $300 a month, he would get $152.50; those who earn more get considerably more. Maximum benefits under old-age and survivors insurance, on the other hand, are $85 for a single man and $127.50 for a couple.

Retirement benefits under old-age and survivors insurance are half again as much for a couple as for a single person if the wife is also 65. In practically all other plans, except the Railroad Retirement System, the amounts are the same regardless of marital status. Old-age and survivors insurance also pays a benefit to an aged widow on the death of a covered worker although she receives only three-fourths of the amount which would have been payable to the worker himself.

In the public programs and in the majority of private plans the amount which an individual gets is related to his level of earning. There are, however, notable exceptions. Benefits payable under the plan in the coal-mining industry and those in the auto industry are unrelated to compensation, and the relatively high minima payable under the steel plans will for many years result in the same pension amounts for workers at various wage levels. The plans which are related to compensation, of course, automatically pay somewhat higher benefits as the general wage level rises. This is particularly true of the plans such as those in the steel industry, which generally relate benefits to earnings in the last 10 years, or plans such as those of United States Rubber, American Telephone & Telegraph, and many systems covering public employees, which relate benefits to a high 5- or 10-year period.

Under the ŎASI formula, on the other hand, benefit levels respond quite slowly to rising rates of compensation. Benefits are based on a lifetime average, and wage increases above $3,600 a year have no effect. on benefit amount. In OASI, adjustment to changing wage levels requires legislative action.

In practically all of the programs there is variation in benefit amount according to length of service, but in most cases the plans give workers in the older age group at the time the plan goes into effect full or nearly full rate benefits, regardless of the short period of their employment after the inauguration of the plan. The old-age and survivors insurance program does this through the eligibility requirements and the benefit formula, the other plans through the device of past service credits.

Service requirements for benefits

All of the retirement programs, both public and private, pay benefits only after a period of work under the system. This is the reason many of the present aged are ineligible for benefits; they or the persons they were dependent on became disabled, retired, or died without meeting the service requirements.

In the long run a person must have been in covered employment 10 years to be eligible for a retirement benefit under old-age and survivors insurance. For the early years of the program, however, in order to make the program effective for those already near age 65, a shorter period of work is sufficient. Before the OASİ amendments of 1950, an individual was eligible if he worked in covered employment at least half the time after 1936 and before reaching age 65. All workers were required to have at least 12 years of service in

covered employment. The minimum service requirements are still generally the same except that the starting point is now 1950 rather than 1936; wage credits earned any time after 1936 continue to count toward meeting the new requirements. Since work in nearly 8 out of 10 jobs counts toward old-age and survivors insurance eligibility, most people now working, young as well as old, will find those requirements easy to meet.

Service requirements under private plans are much more difficult to fulfill because the employment must all be with the same employer or, in some plans, in the same industry. Collective-bargaining plans frequently require as much as 15 or 20 years' service before making any payment. Long service requirements are also typical of the uninsured noncontributory employer-sponsored plans. The group annuity plans, on the other hand, may not have service requirements as such but the waiting period before a worker is covered under the plan amounts to a service requirement. (This requirement, though, is usually a short one-typically 1 to 5 years and often attainment of a certain age such as 25 or 30.) In addition, some such plans do not permit new employees past 55 or 60 to be covered.

Those plans, and they are frequently the large ones, which require relatively long employment with the same employer or industry do not protect the worker who changes jobs after, say, 45 or 50. This is one reason why it is very difficult to say just how much protection these plans afford. There are more than 10 million persons working in jobs which would provide them with benefits supplementary to old-age and survivors insurance if they stayed in those jobs long enough. But how many will?

14

American workers change jobs frequently and even move from industry to industry in substantial numbers. The wage records of the Bureau of Old-Age and Survivors Insurance show that in 1948, 25 percent of all covered workers were employed in more than one industry. In most cases these workers actually changed jobs, although some held two jobs at the same time or took on new work during temporary lay-offs. In 1944, 30 percent were employed in more than one industry; in 1945, 32 percent; in 1946, 31 percent; and in 1947, 26 percent. In the steel industry in 1947, 38 percent of all workers worked for at least two different employers during the course of the year, and 36 percent of all steel employees worked in at least one other industry as well. In the automobile industry, the corresponding proportions were slightly higher-40 percent of all workers earned wage credits with at least two different employers, and 39 percent were employed in at least one other industry. The movement from employer to employer and industry to industry is by no means confined to younger workers. In the 20-year age interval where job mobility is lowestage 45 to 65-the movement from employer to employer for 1948 was 23.4 percent.15

14 This figure is larger than the 9.6 million covered in 1951 because it includes an allowance for those who have not yet met the eligibility requirements under contributory plans. 15 Some allowance must be made in considering these figures for those who hold two jobs and work in more than one industry at the same time, and for those who change industry but not employers. On the other hand, these data probably understate the total volume of employer and industry change, because they measure the changes only within employments covered by the old-age and survivors insurance program prior to the 1950 amendments.

It is not known to what extent the workers who move one year are the same workers who moved the preceding year. In spite of these high annual mobility rates, it is still possible that a large proportion of workers stay with the same employer between the ages of 45 to 65. This may be particularly true of the employees of firms with pensions. The current population survey of the Bureau of the Census shows that in January 1951, half the men 65 and over who were still working had held their present jobs 10 years or more. In the age group 55 to 64, 44 percent had held their present jobs 10 years or more. These percentages would be much higher for pension firms alone, since the over-all figures include farm labor, construction workers, and others who change jobs frequently. More information is needed on the mobility of workers in these older age groups before we can be sure of the extent to which long service requirements limit the protection offered by private plans. This is a significant area for further exploration.

Vested rights

Many private plans, including most collective-bargaining plans, require the individual to be working for the particular employer or industry or to be on some kind of leave status at the time of retirement in order to receive any benefit at all. Other plans give certain rights on termination of employment before retirement age. In private contributory plans, an employee whose service is terminated before retirement is always entitled to a refund of his contributions, usually with interest.

In many employer-sponsored plans an employee who meets certain requirements with respect to length of service, age, or both, is given an equity in the pension rights accumulated for him out of his employer's contributions. This is known as "vesting" and is usually in the form of a paid-up annuity deferred to retirement age. Thus, an employee leaving a firm at age 45, for example, may be given a paid-up annuity maturing at age 65 for an amount purchasable by both his own and the employer's contribution. Vesting may be complete; that is, the employee is entitled to the full value of the deferred annuity to his credit, or it may be graded, in which case partial vesting is established after an initial number of years of coverage, with the proportion vested increasing gradually to full vesting after an additional number of years. A combination eligibility requirement for vesting of both a specified age at termination of employment (45 to 55) and of service (10 to 20 years) is quite common. Service alone, usually 5 to 15 years, is required more frequently than age alone, which is usually age 55.

The Federal programs tend to have liberal vesting provisions. The Railroad Retirement System has vesting after 10 years and civil service after 5 years. The right to retirement benefits under old-age and survivors insurance is vested after meeting the minimum service requirements previously described. As of the beginning of 1952, 22.6 million persons had such rights under old-age and survivors insurance and will be entitled to benefits whether they work longer or not. Contributions

Although benefits under retirement plans are given only to those who have earned a right to them through a period of employment. many plans do not require the employee to make a direct cash con