Three streams, one river: A coordinated approach to financing retirement

Health Affairs

Volumn 18, Issue 1, 1999, Pages 80-91

  Etheredge, Lynn ^a  

^a Department of Health Care ^*  (United States)

Author keywords

[No Author keywords available]

Indexed keywords

AGED; ARTICLE; ECONOMICS; EMPLOYMENT; HEALTH CARE POLICY; HEALTH INSURANCE; HUMAN; MEDICARE; PENSION; POLICY; RETIREMENT; SOCIAL SECURITY; UNITED STATES;

AGED; EMPLOYMENT; HEALTH CARE REFORM; HUMANS; INSURANCE, LONG-TERM CARE; MEDICARE; PENSIONS; PUBLIC POLICY; RETIREMENT; SOCIAL SECURITY; UNITED STATES;

EID: 0032615415     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.18.1.80     Document Type: Article

References (21)

1. House Committee on Ways and Means, 1996 Green Book (Washington: U.S. Government Printing Office, November 1996), Table 1-9.
2. Employee Benefit Research Institute, What Are Personal Savings? (Washington: EBRI, May 1998), based on National Income and Product Accounts data.
3. Some of these workers will earn retirement benefits at other points in their career; others will withdraw and spend funds prior to retirement.
4. V.R. Fuchs, "Health Care for the Elderly: How Much? Who Will Pay for It?" Health Affairs (January/February 1999): 11-21.
5. For defined-benefit plans, earlier retirement often is available with reduced benefits; later retirement may not result in higher benefits.
6. Actuarially reduced (or enhanced) benefits would be budget-neutral for trust-fund expenditures over time. Medicare benefit reductions could be through higher premiums.
7. Social Security benefits for new retirees now average more than $9,000; Medicare expenditures for sixty-five-year-olds average more than $3,000.
8. The lowest quintile had only $2,499 in such savings and the second quintile, $16,747. Asset Ownership of Households, 1993 U.S. Census.
9. EBRI Databook on Employee Benefits, 4th ed. (Washington: EBRI, 1997), based on March 1996 Current Population Survey data.
10. Fuchs, "Health Care for the Elderly."
11. Pension policy has been supplemented in recent years by IRAs, Roth IRAs, and a medical savings account (MSA) demonstration.
12. The intentional inequities include (1) "integration" rules that allow employers to reduce pensions for lower-wage workers to offset their Social Security benefits; (2) employer contributions based on percentage of earnings, which result in higher contributions for higher-income workers; and (3) the greater tax advantages of tax-excludable income for higher-income executives. Disparities are limited by various "top-heavy" rules and other provisions. Social Security and Medicare intentionally favor low- and moderate-income workers.
13. D. Salisbury and N. Jones, eds., Pension Funding and Taxation (Washington: EBRI, 1994); and R. Friedland et al., eds., Social Welfare Policy at the Crossroads (Washington: National Academy of Social Insurance, 1994).
14. D. Salisbury and N. Jones, eds., Pension Funding and Taxation (Washington: EBRI, 1994); and R. Friedland et al., eds., Social Welfare Policy at the Crossroads (Washington: National Academy of Social Insurance, 1994).
15. All retirement plan assets, including Keoghs and IRAs, totaled about $8 trillion as of the end of 1996. EBRI, personal communication, 18 June 1998. In contrast, Social Security and Medicare trust-fund assets were about $700 billion.
16. One of the options proposed by the Advisory Council on Social Security was to direct part of Old Age and Survivors Insurance (OASI) contributions to individual pension accounts. Improvements in Social Security Administration (SSA) procedures will be needed to implement individual account proposals.
17. Collection and redirection of contributions would occur via the banking system, so the pension contributions need not become government revenues and outlays. Funds also could be remitted directly by employers to pension plans, if more convenient. Pension experts believe that payroll withholding methods are essential for broad participation in retirement plans; most employees do not now have payroll withholding for their IRA contributions, which is one reason that participation is low.
18. Employers that now offer pension plans would not be likely to drop them since an employer-sponsored plan offers (1) higher contribution limits (up to $30,000 for executives); (2) greater employer design flexibility; and (3) tax exclusions of employer contributions from Old Age, Survivors, Disability, and Health Insurance (OASDHI) taxes, a 15.3 percent advantage. A similar approach for extending health insurance coverage is proposed by L. Etheredge and S. Jones, "Affordable Health Benefits for Workers without Employer Coverage" (Health Insurance Reform Project, George Washington University, Washington, D.C., February 1998).
19. K.R. Levit et al., "National Health Expenditures, 1996," Health Care Financing Review (Fall 1997): Table 17.
20. Long-Term Budgetary Pressures and Policy Options (Washington: Congressional Budget Office, May 1998).
21. A rollover option excludes the pension funds from income taxes that would need to be paid if the pension funds were withdrawn and then used to pay the premiums.