Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 5, 1995 TAG: 9505050093
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Knight-Ridder/Tribune
DATELINE: WASHINGTON LENGTH: Medium
Chief among the proposals by the Committee for Economic Development, made up of 250 corporate executives and university presidents, is a shift that would allow employers to make higher contributions to pension plans during profitable years.
In the 1980s, Congress approved legislation limiting the amount of money companies can contribute to pension plans. That policy resulted in the significant drop in employer contributions to these plans.
In a report released Thursday, the committee warns that as more than 70 million baby boomers begin moving into retirement after the turn of the century, current pension policy will result in a $1.5 trillion shortfall in combined federal, civilian and military pension plans. The estimate is based on projections by the White House Office of Management and Budget.
``America's retirement system is underfunded, over-regulated and soon to be challenged by unprecedented growth in the retirement-age population,'' said Lawrence A. Weinbach, who lead the committee.
The report, ``Who Will Pay for Your Retirement? The Looming Crisis,'' cites a number of examples of regulations that, while intended to address such issues as retirement equity and security, made it harder for employers and employees to save for retirement.
According to the report, the most damaging regulations were enacted in 1987 and limited the amount companies could put in tax-deferred accounts for their employees' retirement.
Previously, there was no limit on the amount companies could stash away in retirement plans for their employees in good years, according to the Employee Benefit Research Institute.
By often contributing more than was necessary, in order to limit tax liability, companies often were able to contribute little or nothing in bad years and still maintain strong pension plans.
The result has been a significant underfunding of the actual benefits to be paid out, according to the report. That underfunding of private retirement plans reached $71 billion in 1993, according to the Pension Benefit Guarantee Corp., the federal agency that insures pension benefits.
Another problem with current pension regulations are ``complicated discrimination rules and funding limits'' enacted to discourage very expensive retirement plans for high-paid workers and to assure that all workers in a company receive similar retirement benefits.
In practice, the laws have caused many companies to contribute less to all their employees rather than just the most highly paid, the report found.
The report also complained that administration costs for pension plans has ``soared'' due to regulations.
In the case of a company with 15 employees, the regulatory cost increased nearly 300 percent.
by CNB