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E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 4, No. 8: April 24, 2003
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Publisher: LSN Employment, Labor, Compensation & Pension Journals
a division of
Social Science Electronic Publishing, Inc. (SSEP)
and Social Science Research Network (SSRN)
Editor: PAMELA PERUN
Urban Institute
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Copyright: SSEP, Inc. 2003. All rights reserved.
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Topic of This Issue:
Papers from the Society of Actuaries, Part II
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T A B L E of C O N T E N T S
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WORKING PAPERS
"Alternatives for Providing Family Retirement Benefits in Social
Security and Employer Sponsored Pension Plans"
ANNA M. RAPPAPORT
William M. Mercer
MANHA YAU
William M. Mercer
"Policy Implications of Aging for Canadian Health Care and
Retirement Programs"
DOUG ANDREWS
Aon Consulting
"Labor Force Trends and Future Social Security Benefits"
DAVID H. PATTISON
Social Security Administration
"Financial Analysis on Retirement Implications for Women"
LORRIE L. HOFFMAN
University of Central Florida - Department of
Statistics and Actuarial Science
LIJIA GUO
University of Central Florida - Department of
Statistics and Actuarial Science
"A Macroeconomic Indicator of Age at Retirement"
ROBERT L. BROWN
University of Waterloo
Statistics and Actuarial Science
ROBIN DAMM
Towers Perrin
ISHMAEL SHARARA
Hewitt Associates
"Gradual Retirement: An Additional Option in Work and Retirement"
YUNG-PING CHEN
University of Massachusetts at Boston
Gerontology Institute
JOHN C. SCOTT
American Benefits Council
S S R N I N F O R M A T I O N
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W O R K I N G P A P E R Abstracts
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"Alternatives for Providing Family Retirement Benefits in Social
Security and Employer Sponsored Pension Plans"
BY: ANNA M. RAPPAPORT
William M. Mercer
MANHA YAU
William M. Mercer
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=390581
Contact: ANNA M. RAPPAPORT
Email: Mailto:anna.rappaport@mercer.com
Postal: William M. Mercer
10 S. Wacker Dr.
Chicago, IL 60606 UNITED STATES
Co-Auth: MANHA YAU
Email: Mailto:manha.yau@mercer.com
Postal: William M. Mercer
10 S. Wacker Dr.
Chicago, IL 60606 UNITED STATES
ABSTRACT:
This paper looks at different ways to think about the economic
relationships within the family and relate them to various ways
of providing for retirement security, within a Social Security
and employer framework. We look at what Social Security offers
in different family situations in the United States and provide
examples from overseas. This paper presents a framework for
thinking about the economic security of spouses and translates
that into alternatives for family benefits within Social
Security and private retirement systems. It focuses on issues
related to providing retirement benefits for spouses, widows,
and divorced spouses and discusses some of the considerations in
Evaluating equal compensation versus a greater benefit to
participants who have dependents. We look at the issues from the
perspective of the government, employer, and individual. The
employer's role is related to the government's and the
individual's roles in providing for retirement security.
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"Policy Implications of Aging for Canadian Health Care and
Retirement Programs"
BY: DOUG ANDREWS
Aon Consulting
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=390622
Contact: DOUG ANDREWS
Email: Mailto:doug.andrews@aonconsulting.aon.ca
Postal: Aon Consulting
145 Wellington Street West Suite 500
Toronto, Ontario M5J 1H8 CANADA
ABSTRACT:
This study outlines how the costs of life insurance, medical
care, disability, and retirement are impacted by increases in
longevity. The author examines how the costs of these benefits
are shared by employee benefit programs and publicly sponsored
programs and how increases in longevity impact this cost sharing
and result in greater cost increases for publicly sponsored
programs. Based on this analysis, likely courses for policy
action that in turn will impact on employer-sponsored programs
are discussed. The author proposes future directions employers
may take in designing their employee benefit programs. The paper
concludes by considering the impact on the economy and
Canadians' standard of living.
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"Labor Force Trends and Future Social Security Benefits"
BY: DAVID H. PATTISON
Social Security Administration
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=390644
Contact: DAVID H. PATTISON
Email: Mailto:david.h.pattison@ssa.gov
Postal: Social Security Administration
500 E Street, SW
ITC Building, 9th Floor
Washington, DC 20254 UNITED STATES
ABSTRACT:
Trends in employment and earnings patterns in the population,
particularly the increase in the number of two-earner couples,
create a hurdle for the long-term modeling of Social Security,
because benefits are intricately related to employment and
earnings. The spouse and widow benefits of women who are
eligible for their own retired worker benefits are particularly
problematic because of the dual entitlement reduction under
which a woman's spouse or widow benefit is reduced, dollar for
dollar, by any increase in the woman's retired worker benefit.
This paper examines a technique that allows long-term
macromodeling of the economy to incorporate these intricate
effects. The technique makes use of a microsimulation model of
individual workers, with the microsimulation model specified in
such a way that the earnings and employment of its individuals
can be constrained to meet specified calendar-year projections
for aggregate employment and earnings. The technique is used to
carry out a 75-year analysis, examining the sensitivity of
Social Security taxes and benefits to changes in women's
employment and earnings under three scenarios: an increase in
women's employment holding average earnings constant, an
increase in women's earnings holding employment constant, and a
simultaneous increase in both employment and average earnings.
As expected, the dual entitlement reduction limits the increase
in benefits for many of the women.
Over the 75-year period the increase in payroll taxes from
women's higher earnings will more than offset the increase in
benefits from their earnings. The simulations indicate, however,
that there is an additional effect from higher women's earnings
through the national average wage indexing series, which is used
to set the overall level of benefits. By raising the national
wage index, higher women's earnings can increase the overall
level of benefits, thereby offsetting some or all of the
increase in payroll taxes.
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"Financial Analysis on Retirement Implications for Women"
BY: LORRIE L. HOFFMAN
University of Central Florida - Department of
Statistics and Actuarial Science
LIJIA GUO
University of Central Florida - Department of
Statistics and Actuarial Science
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=390660
Contact: LORRIE L. HOFFMAN
Email: Mailto:hoffman@mail.ucf.edu
Postal: University of Central Florida - Department of Statistics
and Actuarial Science
Orlando, FL 32816 UNITED STATES
Co-Auth: LIJIA GUO
Email: Mailto:lguo@mail.ucf.edu
Postal: University of Central Florida - Department of Statistics
and Actuarial Science
Orlando, FL 32816 UNITED STATES
ABSTRACT:
This study addresses some aspects of the financial impact on
women under the Social Security benefits reform or
redistribution. This paper presents a preliminary result of the
study. A multiple decrement model (LL Model) is developed based
on a proxy population of U.S. women and its demographic
projection. Social Security benefits under current policy rules
are then assigned to each sample unit in the resulting proxy
population. The authors then compare aggregate benefit
entitlement figures under current policies to figures obtained
when potential policy change is implemented.
For example, one potential policy change is the proposed
"de-coupled allocation" policy, which involves changing the
current benefit loss (ranging from 33–50%) upon spousal death to
40% in order to redistribute wealth and to help alleviate
poverty in elderly widows. The analysis of the authors shows
that this redistribution is more equitable for "de-coupled
allocation", of which the gross effect would not significantly
increase Social Security payments. The redistribution also seeks
to improve the financial condition of the American senior
citizens who live below the poverty line.
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"A Macroeconomic Indicator of Age at Retirement"
BY: ROBERT L. BROWN
University of Waterloo
Statistics and Actuarial Science
ROBIN DAMM
Towers Perrin
ISHMAEL SHARARA
Hewitt Associates
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=390669
Contact: ROBERT L. BROWN
Email: Mailto:rlbrown@uwaterloo.ca
Postal: University of Waterloo
Statistics and Actuarial Science
Waterloo, Ontario N2L 3G1 CANADA
Co-Auth: ROBIN DAMM
Email: Mailto:dammr@towers.com
Postal: Towers Perrin
Calgary, Alberta T2P 3Y7 CANADA
Co-Auth: ISHMAEL SHARARA
Email: Mailto:i2sharar@hewitt.com
Postal: Hewitt Associates
25 Sheppard Ave. West
Toronto, Ontario M2N 6T1 CANADA
ABSTRACT:
This paper explores the relationship between the Wealth Transfer
Index (WTI), a statistic defined by Brown and Bilodeau (1999),
and retirement age, which is the age at which the workers in an
economy cease to be economically productive. Appropriately
expressed as ratio of consumption demand to labor productivity,
the WTI is a barometer for the demand for wealth placed on the
workers of an economy. This paper explains why a relationship
between this statistic and retirement age must exist. Using
Canadian historical median retirement age data compiled by
Statistics Canada and calculated values of the WTI for the same
period, three linear regression models are fitted. The
conclusion from this analysis is that there is a strong positive
correlation between the WTI and average retirement age.
This paper also briefly looks at the well-documented
demographic shift expected to occur in Canada because of the
baby boom-baby bust tidal wave. The aged dependency ratio is
expected to increase dramatically, reaching 45% in 2036. A
practical application of the WTI model suggests that the baby
boom cohort may experience a rise in the normal retirement age
in the period 2017-34. They will, in effect, be forced to retire
at ages that will allow for an "acceptable" transfer of wealth
from the workers to dependent Canadians. Using one of the fitted
linear regression models and projected values of the WTI, the
paper then projects the median retirement age to 2041 for
Canadian workers. The paper concludes by speculating on how the
marketplace might respond to higher retirement ages.
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"Gradual Retirement: An Additional Option in Work and Retirement"
BY: YUNG-PING CHEN
University of Massachusetts at Boston
Gerontology Institute
JOHN C. SCOTT
American Benefits Council
Contact: YUNG-PING CHEN
Email: Mailto:bing.chen@umb.edu
Postal: University of Massachusetts at Boston
Gerontology Institute
100 Morrissey Boulevard
Boston, MA 02125-3393 UNITED STATES
Co-Auth: JOHN C. SCOTT
Email: Mailto:jscott@abcstaff.org
Postal: American Benefits Council
1212 New York Avenue, NW
Washington, DC 20005 UNITED STATES
ABSTRACT:
This paper is concerned with the implications of demographic and
labor force changes for work and retirement. It discusses the
role of gradual retirement in introducing flexibility into the
range of choices between work and retirement. Part I explains
the rationale for gradual retirement. Part II discusses some
of the major barriers and possible solutions to gradual
retirement, along with some examples of gradual retirement
arrangements in both the public and private sectors. Part III
contains some concluding remarks.