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Abstract:
These are interesting times in the pension world now that there are two diametrically opposed proposals for change before Congress. The first is the Pension Preservation and Savings Expansion Act of 2003 recently introduced by Representatives Portman and Cardin. This bill embodies the traditional type of pension reform, an omnibus statute that tinkers with almost every aspect of the private pension system to make incremental
changes. The second is the Administration's attempt at radical change and simplification. Its proposal contemplates a sweeping consolidation in the number and types of defined contribution plans. This paper evaluates these two approaches - one evolutionary, the other revolutionary - and then considers an alternative. Its analysis focuses on the nuts-and-bolts of the private pension system, that is, on the plans that comprise it and the rules that govern them. Its thesis is that examining the architecture and machinery of the private pension system can teach us much about directions for reform.

Abstract:
In 1999, the Employee Retirement Income Security Act of 1974 (ERISA), the primary law regulating the private pension system, turned 25. Since 1974, ERISA has expanded in unanticipated and often irrational ways. The private pension system is now burdened with overly complex rules, regulations, and plan types inhibiting its ability to generate adequate retirement income for millions of Americans. This paper proposes a new model for ERISA at 50 with vastly simplified plans and rules intended to make the private pension system more accessible by employers and employees alike. The center of the proposal is a single, standard defined contribution plan that would include a simplified option for employee savings. The role played by IRAs is also enhanced, enabling them to achieve parity with employer plans through a coordinated individual savings limit. The proposal also suggests ways in which defined benefit plans could be adapted for an aging workforce and alternatives for the nondiscrimination rules to increase benefit accruals by moderate-income workers. The paper then looks to ERISA at 65 and proposes replacing the employer-sponsored plan with individual defined contribution accounts offered through the financial services industry. It explains how removing the superstructure of a plan could simplify benefits law and enable employers to spend more of their employee benefit dollars directly on their own employees and less on the plan compliance industry.

ERISA, pension, IRA, defined contribution, defined benefit, nondiscrimination

Abstract:
This paper describes an analysis of career earnings patterns developed for predicting the impact of Social Security reform. We produce estimates of age-earnings profiles of American men and women born between 1931 and 1960. The estimates are obtained using lifetime earnings records maintained by the Social Security Administration. We use a standard econometric approach to develop forecasts of future individual earnings, and we supplement these estimates by developing estimates of the shape and prevalence of nine stylized earnings patterns of U.S. workers. These two alternative approaches to estimating career earnings patterns have significant advantages over the traditional analytical approach of examining a small number of representative workers who are assumed to have steady earnings throughout their careers. Few workers have level career earnings, so the traditional approach to policy simulation represents a serious distortion of actual labor market experience. Moreover, differences in the pattern of career earnings can produce wide disparities in pension entitlements, even for workers with the same average earnings, under individual account and other retirement plans. Since defined-contribution pension plans are frequently proposed as a supplement or replacement for traditional Social Security, it is important that policy simulation be based on accurate representations of career earnings patterns.

Social Security, Retirement, pension

Abstract:
Despite decades of significant tax subsidies for pensions and retirement accounts, most Americans retire with little or no pension saving. The federal government will give out more than $750 billion in estimated tax subsidies for pension plans between 2007 and 2011, and yet, many low- to middle-income families have too few financial assets to afford retirement.

The United States needs a pension system that addresses 21st century needs, one that complements and is able to accompany any Social Security reform the nation is likely to see in the near future. This paper suggests that it is possible to create using the language of the pension world a Super Simple saving plan that would provide a basic, low-cost, easily administrable plan with the potential to increase significantly the retirement assets available to moderate- and middle-income individuals.

The Super Simple plan would (1) create solid minimum levels of employer contributions for low- and moderate-income workers; (2) include automatic contribution features for employees who do not formally opt out; (3) remove many of the complex discrimination rules surrounding retirement plans; (4) create a significant government match for savers to replace the largely symbolic match now in existence for only a few taxpayers; and (5) streamline today's multiple 401(k)-type plans through a simple plan design attractive to employers and employees alike.

pension retirement 401(k) saving

Abstract:
Savings policy in the United States is at a critical juncture. The U.S. personal saving rate has declined from 10.8 percent in 1984 to zero in 2005. The national saving rate, which includes government and business savings, is the lowest among the G-20 countries and has decreased significantly in recent decades. These low levels of saving generally suggest lower growth rates of income and standards of living in the future.

This paper considers barriers in current policies that confront households trying to save more. These include the complexity of laws affecting retirement and saving plans, and the exclusion of many households from using incentives that are worth the most to those facing the highest tax rates. It also discusses the effect of asset tests in welfare and education policies and other institutional barriers that discourage saving, especially for low- and moderate-income families.

Without advocating any particular savings policy or reform, this paper discusses several proposed policies to build assets for all Americans. These include new initiatives such as universal children's accounts and enhanced Individual Development Accounts (IDAs). The paper also explores improvements to existing programs such as matched subsidies for retirement savings, and an enhanced, refundable tax credit for low-income savers. Although many of these ideas have not been fully developed and are open to debate on their merits, we believe they form an important part of the discussion about how to boost savings in the United States.

Abstract:
In this paper, the author argues that the primary Social Security "issue" is not how to design that particular system for retirees 50 or 75 years hence. Instead the broader question is whether the federal government budget can be adaptable enough over time to best meet the needs of all people over the next 50 or 75 years. Right now, Social Security and other elderly programs have large amounts of growth built into them in fairly rigid ways. Legislators simply cannot create systems with that much built-in growth without having impacts far beyond the systems themselves.

This paper analyzes three major areas affected by the existing structure of growth in elderly programs. The first is the budget. Built-in growth does not just affect future budgets; it is already a major factor affecting current budget battles. The second is the labor force. Social Security induces people to retire at what now must be considered late middle age. If that trend continues as the baby boom generation retires, there will be a significant reduction in the percentage of the adult population that will be working. The third is the needs of the elderly. Because legislators have set growth patterns in ways that are acclimated to deal with problems as perceived in the past, the system has become less targeted toward the most pressing problems of the elderly themselves. In particular, for each additional dollar of expenditures it makes, Social Security is targeting smaller and smaller shares of benefits to either the older or the more needy among the elderly. By predetermining growth rules, however, change is hard to make. The structure of the existing system confronts politicians with the dilemma of reneging on some set of promises if they want to make the system better at meeting its basic purposes.

What we face as a society is a much broader question of how well we are going to allocate scarce resources to meet the most important needs of our nation. Demographic changes have merely forced this issue to the fore, but they would be there to some extent anyway. The issue plays itself out in the three topics discussed here: the current and future allocation of the federal budget and how those allocations are affected by automatic built-in growth of a few major programs; the extent of future labor force participation by adults and how current institutional structures may be blocking a very natural movement toward work by what will soon be a very large stock of older - but not necessarily old - people with significant capabilities; and the continual allocation of decreasing shares of the elderly budget away from those elderly with the greatest needs.

Abstract:
Many current proposals to promote more universal health insurance coverage contain mandates that would require individuals to buy health insurance. Language is important here: some who oppose an individual mandate do not object to modest penalties for those who fail to purchase insurance. Other proposals would impose requirements on employers to provide or pay for coverage in addition to or instead of an individual mandate. "The general theoretical conclusion from economics," writes Mark Pauly, "is that there is likely to be very little difference, in the long run, between an individual and an employer mandate" (Pauly 1994). This argument rests largely on the notion that if the same ultimate tax or mandate is imposed on exactly the same activity, the ultimate economic incidence doesn't depend on who initially pays. People will eventually react to the same net incentives in the same way. In practice, however, significant differences arise between what can be implemented through charges on employers and on employees, often guided by practical issues of administration and how people respond to alternative administrative structures.

While well grounded in principle, mandates to pay for or purchase health insurance must confront important administrative challenges. Most important, for many people a mandate to purchase health insurance requires that they receive subsidies adequate to make the insurance affordable. At the same time, given the long history of less than full participation in means-tested benefit programs, administration of mandates and subsidies needs to be carefully coordinated and thought out. Both are difficult. In addition, since sizable penalties are hard to collect after the fact or at the end of the year, payments should be kept current and penalties modest. Among the available techniques are withholding, automatic enrollment, and relating the penalty to some other tax or transfer benefit that can be denied through simple administrative means.

This paper identifies ways to structure health insurance mandates, if adopted at the federal level, so that they are more likely to be administered fairly and effectively. In doing so, it draws on information about the administrative arrangements used in existing health insurance mandates in Hawaii, Massachusetts, the Netherlands, and Switzerland, as well as the administration of mandates proposed by California Governor Arnold Schwarzenegger, the New America Foundation, and Senators Ron Wyden (D-OR) and Robert Bennett (R-UT). The appendix to this paper provides detailed information about the administrative features of these existing and proposed mandates.

health insurance, health coverage, insurance mandates, administrative arrangements, benefit programs, affordable insurance

Abstract:
Traditional analyses of retirement decisions focus on the age, from birth, of the individual making choices about how much to work, consume, and save for old age. However, remaining life expectancy is arguably a better way of examining these issues. As mortality rates decline, people at a given age now have more remaining years of life expectancy than they did in the past. If participation rates at older ages remain constant (or decline), then average time spent in retirement will increase. Additionally, because health status and mortality are correlated, adults with more expected years of life are generally in better health (and better able to work) than those with fewer years of remaining life.

This paper examines labor force participation rates of older workers considering both chronological age and remaining life expectancy. Results show that participation by remaining life expectancy declines for men through the early 1990s, leveling off in the next decade. However, participation by age has been rising for men in their sixties since the mid-1990s. Whether we specify the empirical model by age or by remaining life expectancy, ages 62 and 65 both have strong negative effects on participation, confirming a major role in retirement decisions for Social Security. Finally, we find that controlling for other factors – education, marital status, and business cycle effects – magnifies the decline in participation attributable to cohort effects for men born between 1900 and 1960, but reduces the importance of cohort effects for women born in these years.

Abstract:
Traditional analyses of retirement decisions focus on the age, from birth, of the individual making choices about how much to work, consume, and save for old age. However, remaining life expectancy is arguably a better way of examining these issues. As mortality rates decline, people at a given age now have more remaining years of life expectancy than they did in the past. If participation rates at older ages remain constant (or decline), then average time spent in retirement will increase. Additionally, because health status and mortality are correlated, adults with more expected years of life are generally in better health (and better able to work) than those with fewer years of remaining life.

This paper examines labor force participation rates of older workers considering both chronological age and remaining life expectancy. Results show that participation by remaining life expectancy declines for men through the early 1990s, leveling off in the next decade. However, participation by age have been rising for men in their sixties since the mid-1990s. Whether we specify the empirical model by age or by remaining life expectancy, ages 62 and 65 both have strong negative effects on participation, confirming a major role in retirement decisions for Social Security. Finally, we find that controlling for other factors - education, marital status, and business cycle effects - magnifies the decline in participation attributable to cohort effects for men born between 1900 and 1960, but reduces the importance of cohort effects for women born in these years.

Abstract:
The choice of retirement age is the most important portfolio choice most workers will make. Drawing on the Urban Institute's Dynamic Simulation of Income model (DYNASIM3), this report examines how delaying retirement for nondisabled workers would affect individual retiree benefits, the solvency of the Social Security trust fund, and general revenues. The results suggest that delaying retirement by itself does not generate enough additional revenue to make Social Security solvent by 2045. Benefit cuts or supplementary funding sources will be necessary to achieve solvency. However, the size of the benefit cuts or tax increases could be minimized if individuals worked longer. This additional work also substantially increases worker's retirement well-being. Lower-income workers, to the extent they can work longer, have the most to gain from their additional labor. Policy changes that encourage work at older ages will substantially improve both economic and personal well-being in the future.

Retirement, Social Security, taxes, federal deficit, retirement well-being

Abstract:
Our project uses DYNASIM3, the Urban Institute’s dynamic microsimulation model of the U.S. population, to simulate several alternative systems of Social Security auxiliary benefits. We specifically consider earnings sharing, a system in which a husband’s and a wife’s earnings records are combined and averaged over the duration of their marriage when computing Social Security benefits. We also consider whether other changes to Social Security’s benefit computations — like caregiver credits, minimum benefits, and more modest changes to spouse/survivor benefits — could improve program adequacy and horizontal equity with less complexity and fewer transition difficulties relative to earnings sharing. Each proposal we examine substitutes existing spouse (and, sometimes, all or parts of survivor) benefits with mechanisms that explicitly acknowledge marital partnerships, are more neutral with respect to marriage, and/or better target economically vulnerable people. All proposals are roughly cost-equivalent in 2050. We find that all three packages — earnings sharing, replacement of most of the spouse benefit with a minimum, and full spouse replacement with caregiver credits — reduced poverty modestly and made lifetime benefits more similar for couples paying the same amount in taxes relative to current law scheduled. The earnings-sharing proposal, however, only achieved the poverty reduction with significant adjustments to the treatment of surviving spouses through a self-financed survivor benefit. The packages reveal important tradeoffs among beneficiary groups, with particular tensions between workers and non-workers, and married, never married, divorced, and widowed persons.

Abstract:
Our project uses DYNASIM3, the Urban Institute's dynamic microsimulation model of the U.S. population, to simulate several alternative systems of Social Security auxiliary benefits. We specifically consider earnings sharing, a system in which a husband's and a wife's earnings records are combined and averaged over the duration of their marriage when computing Social Security benefits. We also consider whether other changes to Social Security's benefit computations - like caregiver credits, minimum benefits, and more modest changes to spouse/survivor benefits - could improve program adequacy and horizontal equity with less complexity and fewer transition difficulties relative to earnings sharing. Each proposal we examine substitutes existing spouse (and, sometimes, all or parts of survivor) benefits with mechanisms that explicitly acknowledge marital partnerships, are more neutral with respect to marriage, and/or better target economically vulnerable people. All proposals are roughly cost-equivalent in 2050. We find that all three packages - earnings sharing, replacement of most of the spouse benefit with a minimum, and full spouse replacement with caregiver credits - reduced poverty modestly and made lifetime benefits more similar for couples paying the same amount in taxes relative to current law scheduled. The earnings-sharing proposal, however, only achieved the poverty reduction with significant adjustments to the treatment of surviving spouses through a self-financed survivor benefit. The packages reveal important tradeoffs among beneficiary groups, with particular tensions between workers and non-workers, and married, never married, divorced, and widowed persons.

Abstract:
Encouraging work at older ages is a critical policy goal for an aging society, but many features of the current system of benefits and taxes provide strong work disincentives. The implicit tax rate on work increases rapidly at older ages, approaching 50 percent for some workers by age 70. In addition, by age 65 people can typically receive nearly as much in retirement as they can by working. If older Americans could overcome these barriers and delay retirement, they could substantially improve their economic well-being at older ages. For example, many people could increase their annual consumption at older ages by more than 25 percent by simply retiring at age 67 instead of age 62.

Abstract:
Some Social Security reforms would provide guarantees that individuals would not receive less under a reformed system than would be provided by current law. However, the "current law" benefit formula increases benefits when wages rise. Any reform successfully adding to economic growth, therefore, would affect those promised levels of benefits, as well as revenues and the interest rates that determine what could be earned and paid out of individual accounts. This paper concludes that guarantees could add significantly to the costs of Social Security, reduce any reduction in budget imbalance achieved through other parts of a reform, and add to taxes, direct or implicit, that must be paid to cover those costs. Stock and bond market variation, as well as variation in returns on individual accounts, also add to costs when reform contains a guarantee, as government bears mainly downside risks. A variety of examples are provided for one generic type of reform.

Abstract:
While growing fiscal pressures and increasing life expectancy have prompted calls to raise retirement ages so that lifetime benefits would be concentrated in older ages, some fear that this change - without other adjustments - might harm long-career, lower-wage workers. Tying retirement benefit eligibility to years of service might protect lower-wage workers if they tend to start their careers relatively early and work more years prior to retirement than higher-wage workers. But higher disability rates and greater employment volatility could offset lower-wage workers’ early labor force starts, and lead to fewer total years of service completed. Using survey data matched to administrative earnings records, we describe variation in work histories for current and near retirees by gender, education, and other important characteristics. We find that years of service are not likely to provide an effective way to protect the lowest-wage workers. Among other reasons, men and women with the least education also work the least.

Abstract:
Little research has analyzed the motivations forcreating a nonprofit enterprise; thus, the focus here is on the factors thatmotivate entrepreneurs to create both nonprofit and charitable for-profitenterprises. To understand both the birth and death rate of new nonprofitenterprises, data from the National Center for Charitable Statistics (NCCS) areanalyzed, examining the entry and exit rates of new nonprofit firms between1992 and 1996. The limitations and advantages of the NCCS data are discussed.Theinflux of charitable for-profit firms and of for-profit social venturing isexamined in terms of the motivations of charitable for-profit entrepreneurs,the differences between charitable for-profit and nonprofit firms, and thelimitations of data for studying charitable for-profit firms.Themotivations of nonprofit entrepreneurs are inspected according to factors suchas utility maximization, charitable impulses, nondistribution constraint, theprovision of public goods, the provision of quality goods, and socialventuring. The impact of external factors, including the demand for nonprofit goods andthe changes in public policy, upon charitable nonprofit organizations isdiscussed.For instance, the impact of AFDC waivers upon nonprofitentrepreneurship is scrutinized.The funding sources of both nonprofitorganizations (grants, contributions, fees, charges) and charitable for-profitsare presented. (AKP)

National Center for Charitable Statistics, Public good, Not-for-profit organizations, Public policies, Philanthropy, Social entrepreneurship, Social responsibilities, Startup rates, Exit rates, Motivation

Abstract:
The authors write that much can be done to make the next economic downturn easier for states. Rainy day funds can be built to higher levels, and revenue sources can be strengthened and made less volatile.

Abstract:
Even after a passage of the 2001 legislation, federal taxes as a share of gross domestic product will fall well within the narrow range that has prevailed since the end of World War II. The bill brought to light the danger of bifurcating the tax and expenditure sides of the budget, and conflicts over progressivity and marginal tax rates could not be resolved without drawing expenditures into the analysis and the bill itself. Finally, whether taxes in the long run go up or down is to a large extent still to be determined by the future direction of entitlement programs.