Pension benefits among the aged: conflicting measures, unequal distributions.

TL;DR: Examination of several measures of aggregate pension benefits in 1990 provides new evidence about the unequal distribution of pension benefits among the aged, confirming from two data sources that benefits are heavily concentrated among higher income groups.

Abstract: Estimates of total benefits paid by employer sponsored pension plans seem to vary widely between different data sources and measures. Such discrepancies have been used to support differing conclusions about the effectiveness of the pension system. This article examines several measures of aggregate pension benefits in 1990, a year particularly rich in available data. Exploratory analysis suggests that the greatest source of discrepancy lies in differing treatments of lump-sum distributions, although the study also identifies several other types of payments that are variously, and erroneously, counted as pension income. Age of recipients is an important factor in analyzing different measures of aggregate pension benefits; discrepancies are much smaller among the aged than in the population as a whole. The analysis also provides new evidence about the unequal distribution of pension benefits among the aged, confirming from two data sources that benefits are heavily concentrated among higher income groups. The metaphor of the 3-legged stool is often used to describe America's system of retirement income security, suggesting that economic well-being among the elderly is based on Social Security, employer provided pensions, and individually accumulated assets. Although the description implies equal levels of support from these three sources, it is not actually expected that the three legs will be equal, nor is the metaphor expected to be universally applicable. Elderly persons vary in their dependence on one or more of the three legs of the stool; some continue to depend on a fourth leg, earnings, well into their "retirement" years; and others, without a sustained history of paid employment, must depend on a fifth leg comprised largely of public assistance payments such as Supplemental Security Income (SSI). However, despite its limitations, the concept of the 3-legged stool provides a useful benchmark against which the actual operation of the retirement income security system may be evaluated. The focus of this article is on the second leg of the stool-benefits from employer provided pensions-and the overriding question is this: How well is our system of employer provided pensions serving America's elderly, both in the context of other components of retirement income security, and by itself? The study of employer provided pensions is important to the Social Security Administration (SSA) for several reasons. As part of its legislative mandate, the agency is broadly concerned with understanding issues of economic security as they relate to the aged and other client populations. In addition, the effectiveness of Social Security can best be evaluated in relation to other components of economic security, and it is only in this ever shifting context that we can anticipate the role Social Security may be expected to play. The Social Security program remains the primary expression of public policy on economic security among the aged. To the extent that the system of employer provided pensions is not serving the aged as a whole-or is not serving particular subgroups among the aged-SSA can expect additional public concern about maintaining or strengthening particular aspects of its programs. Because of these kinds of issues, SSA's Office of Research, Evaluation and Statistics has for years been publishing data on income sources among the aged, including income from employer pensions. One publication that has been widely used in studies of the aged is a biennial statistical series, "Income of the Population 55 or Older."' Authored by Susan Grad, SSA, the series is based on data collected by the Bureau of the Census through its Current Population Survey (CPS).2 These data provide a variety of perspectives on the role of employer provided pensions in the 3-legged stool. For example, the CPS/SSA data for 1990 show that only 44 percent of married couples and individuals aged 65 or older3 were receiving benefits from pensions or annuities, compared with a 92-percent receipt rate for Social Security benefits and a 69-percent receipt rate for asset income (interest, dividends, rents, royalties, and so forth). …