20% excise tax on any ordinary income received under age 59-1/2.

Under RIPA, voluntary employee contributions allowed in separate nonretirement plan

On Tuesday, February 25, 1986, the Subcommittee on Labor-Management Relations is holding a hearing on the Retirement Income Policy Act of 1985, H.R. 3594, and the Retirement Universal Security Arrangements Act of 1985, H.R. 3098. It is likely that these bills will be the vehicles for the most far-reaching pension reform legislation since the Employee Retirement Income Security Act of 1974.

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The most complex of the many issues addressed by
these bills is the practice of pension integration.
by many workers and retirees as the most pernicious of all
pension practices, pension integration is little understood
outside pension consulting firms. For that reasons we thought
we would take this opportunity, in advance of the hearing to
send you the enclosed booklet and provide information about
pension integration.

In simple terms, pension integration means that a
pension plan takes into account an employee's social security
benefit when figuring out a pension benefit.

On its face, pension integration seems harmless enough. However, once the practice is scrutinized, it becomes all too clear that it is a sophisticated way for pension plans to pay disproportionately large benefits to higher-paid employees at the expense of the lower-paid. At its worst, pension integration entirely eliminates the pensions of those lower income workers most in need of a supplement to social security.

Pension integration dates back to a by-gone era when pensions were considered to be gratuities bestowed by employers upon loyal, long-service employees. Does it still makes sense? That is the question that must be addressed in the context of the Retirement Income Policy Act.

As you may be aware, RIPA "splits the difference." It acknowledges that current integration rules are outdated, needlessly complex and can be cruelly inequitable. It modifies and simplifies the rules--assuring that retirees will receive at least half of the pension they have earned under their plen. Do the RIPA integration provisions go far enough or will they merely legitimize practices that undercut the goals of the private pension system?

On Tuesday we will be contending that the RIPA integration provisions do not go far enough. Other groups will be arguing that they go too far. To understand all sides of the issues we urge you to read the dialogue between the employee and the employer that appears at pages 9 through 12 of The Case of the Disappearing Pension.

If you have questions about this all--important issue, we would be pleased to meet with you at your convenience.

Sincere,

5

Karen Ferguson, Director

THE

CASE

OF THE

DISAPPEARING

The Case of the Disappearing Pension was written by
Barbara Coleman for the Pension Education Project.
The Project is funded by the Retirement Research Foundation.
Graphic design by Alice Hudders.

1984 PENSION RIGHTS CENTER

1346 Connecticut Avenue, N.W.
Washington, D.C. 20036