Interested persons should check out the PRC's www page or contact the University of Pennsylvania Press (voice 800/445-9880 or fax (410/516-6998). For information about the Pension Research Council please contact Ms. Juan Tang at tangju@wharton.upenn.edu
Pursuant to a legislative requirement, GAO reviewed Medigap policies, focusing on: (1) the extent to which Medicare beneficiaries are subject to medical underwriting when they change Medigap policies; and (2) options for modifying federal Medigap requirements to ensure that medical underwriting is not a problem in such cases.GAO found that: (1) 11 of the 25 largest Medigap insurers use medical underwriting to determine whom they will insure, 5 sell some policies without medical underwriting, and 9 sell all of their policies without medical underwriting; (2) the American Association of Retired Persons' (AARP) insurer accepts all Medicare beneficiaries who are AARP members without medical underwriting for certain Medigap policies; (3) some Medicare beneficiaries can obtain supplemental insurance from local Blue Cross/Blue Shield plans depending on where they reside; (4) federal law requires Medicare SELECT program insurers to offer participants who want to drop their SELECT policy the option of purchasing a traditional Medigap policy without medical underwriting; (5) some beneficiaries have the option of enrolling in health maintenance organizations (HMO) with Medicare risk contracts; (6) about 99 percent of Medicare beneficiaries do not change their private health insurance, but about 25 percent supplement their existing coverage; (7) few beneficiaries have made formal complaints to their state insurance departments about Medigap underwriting practices; and (8) insurers may discontinue the few policies that do not require medical underwriting in the future, since federal law does not require these insurers to offer such policies.
The Health Care Financing Administration (HCFA) is a federal agency within the Department of Health and Human Services. It was created in 1977 to administer the Medicare and Medicaid programs -- two national health care programs that benefit more that 72 million beneficiaries.
Participants can sign up for 1, 2, or all 3 days depending on their interest. The first day, Wednesday, 9/25, will be devoted to the basics of Qualified Defined Benefit and Defined Contribution plans. The second day, Thursday, 9/26, addresses the basics of health and welfare plans. The third day, Friday, 9/27, goes into advanced issues of current interest in all areas of benefit design. The seminar presents an excellent opportunity for new entrants in the field to quickly learn the fundamentals of the employee benefits field. Anyone interested in finding out more about the seminar, the topics, and the speakers should contact Bea Cunningham in Dallas at (214) 871-7600.
Pursuant to a congressional request, GAO provided information on 401(k) pension plans, focusing on: (1) the proportion of workers covered by 401(k) pension plans; (2) workers' contributions to their 401(k) pension plans; and (3) how workers invest their pension account balances.GAO found that: (1) half of all workers and nearly two-thirds of workers nearing retirement age are covered by a pension plan; (2) one in four workers participates in a 401(k) pension plan; (3) male, white, highly educated, and higher-income workers are more likely to have pension coverage than any other group; (4) one-third of the workers eligible to participate in 401(k) plans do not participate in these plans; (5) union members are more likely to have pension coverage than nonunion workers; (6) more than 70 percent of all workers employed by large firms are covered by at least one pension plan; (7) workers without a high school diploma are unlikely to be covered by a pension plan and fewer than half of the high school dropouts nearing retirement age have no pension coverage; (8) 60 percent of college graduates have pension plans; (9) 60 percent of retirement age workers with incomes less than $25,000 are not covered by a pension plan and rely on Social Security as their primary source of income after retirement; (10) higher-income workers contribute more to their pension plans than lower-income workers; (11) 25 percent of 401(k) participants invest their funds in bonds, another 25 percent invest in stocks, and the remaining participants split their investments between both stocks and bonds; (12) women invest their 401(k) funds more conservatively than men; and (13) workers investing their 401(k) balances in stocks have greater retirement incomes.
Pursuant to a congressional request, GAO reviewed the status of public pension funding, focusing on how plans established under Internal Revenue Code (IRC) section 457 differ from plans created under IRC sections 401(k) and 403(b).GAO found that: (1) most state and local government employees are covered under section 457 plans because the Tax Reform Act of 1986 prohibited state and local governments from establishing plans under sections 401(k) and 403(b); (2) section 457 plan participants risk losses if sponsoring governments go bankrupt or the deferred monies are mismanaged or lost; (3) section 457 does not require sponsoring governments to maintain deferred monies to pay future benefits; (4) section 457 plan participants risk losses because sponsoring governments may view deferred monies as available for public use; (5) while funds enrolled in section 401(k) and 403(b) plans can be transferred to investment retirement accounts (IRA) when the employee leaves state or local government employment, amounts payable from section 457 plans can only be rolled over into other section 457 plans; (6) section 457 plan participants must declare a fixed date for when they will begin receiving their benefits shortly after retiring or leaving employment; (7) according to IRS, the transfer of section 457 plan deferrals into IRA or allowing plan participants to change their distribution dates would create a taxable event or be incompatible with the plan's tax deferred condition of government ownership; (8) section 457 plans allow a lower maximum annual employee deferral and employer contribution than section 401(k) and 403(b) plans, and are not indexed; and (9) new legislation could increase the section 457 plan deferral and contribution limit and index section 457 plans to inflation.
Pursuant to a congressional request, GAO reviewed the status of public pension plan funding, focusing on the basic pension plans of state and local governments.GAO found that: (1) states and localities with underfunded pension plans run the risk of reducing future pension benefits to taxpayers or raising revenues; (2) unfunded liabilities for all state and local pension plans totalled $200 billion in 1992; (3) contributions to pension funds in 1992 fell short of the actuarially required amounts by 60 percent; (4) 75 percent of state and local pension plans involved in a Public Pension Coordinating Council (PPCC) survey were underfunded; (5) more than half of the pension plan sponsors surveyed continued to make payments to pay off their unfunded liabilities; (6) between 1990 and 1992, 20 percent of the plans were both underfunded and not receiving required sponsor contributions; and (7) of 117 plans with complete data in 1990 and 1992, 90 were underfunded.
Pursuant to a congressional request, GAO reviewed the status of public pension plan funding, focusing on federally sponsored defined benefit and contribution plans subject to reporting requirements legislation.GAO found that: (1) 34 federal government defined benefit plans have over 10 million participants and 17 defined contribution plans have 2.2 million participants; (2) the 34 defined benefit plans vary considerably and have assets of over $1.2 trillion; (3) most of the defined benefit plans are administered as trust funds which almost exclusively invest in nonmarketable, special issue Treasury securities, while 6 plans pay benefits from their current year appropriations; (4) most agency plans, except for the Federal Employees Retirement System, are underfunded; (5) the 19 nonappropriated fund activity, federal reserve, and farm credit defined benefit plans are fully funded; (6) the use of trust funds has no effect on current budget outlays and is not a measure of the government's ability to pay future retirement benefits out of tax and other receipts; (7) agencies' budgets have not reflected the full cost of their pension plan programs; (8) the 17 defined contribution plans have more than $28 billion invested in stocks, bonds, and government securities, with the Thrift Savings Plan having about $26 billion in Treasury securities; and (9) defined contribution plan obligations are limited to the employee and employer contributions made and any earnings on them.
Pursuant to a congressional request, GAO provided information on health care quality issues, focusing on: (1) how consumers use health care performance reports that contain comparative data on the quality of health care providers; and (2) what information consumers consider most important.GAO found that: (1) employers and individuals use information that measures and compares the quality of health care furnished by providers and health plans when making purchasing decisions; (2) consumers want performance reporting efforts to continue and are requesting that more data be made publicly available; (3) consumers want standardized and comparable health care information to assess health care providers' or health plans' performance; (4) many employers get health care performance data through business coalitions, consultants, and their own data collection efforts; and (5) although employers have begun cooperating with one another to enhance their purchasing decisions, few employers make health care data available to their employees.
Pursuant to a congressional request, GAO provided information on: (1) the protections offered by current state and federal health insurance portability reforms; (2) the number of people who could be affected by broader national portability standards; and (3) other issues related to the design of national portability standards.GAO found that: (1) although current federal and state laws have improved the portability of health insurance, an individual's health care coverage can still be reduced when changing jobs; (2) 40 states enacted small group insurance regulations between 1990 and 1994 that included portability standards, but the federal Employee Retirement Income Security Act of 1974 prevents states from applying these standards to the health plans of employers who self fund; (3) up to 21 million Americans a year would benefit from federal legislation that would waive preexisting condition exclusions for individuals who have had continuous health care coverage; and (4) as many as 4 million Americans who have been unwilling to leave their jobs because of concerns about losing their health care coverage would benefit from national portability standards.
Pursuant to a congressional request, GAO provided information on the role that pension plans play in expanding public investment in infrastructure projects.GAO found that: (1) pension plans have not been investing in domestic public infrastructure because of the combined effects of federal law, which requires plans to seek the highest rate of return on investments and encourages growth by exempting earnings from taxation; (2) to encourage public investment in infrastructure, federal law provides a tax exemption on interest income to those who invest in municipal bonds; (3) pension plans have no incentive to invest in lower-interest municipal bonds, since plan earnings are already tax exempt; (4) although the Infrastructure Commission recommended creating two federal financing entities to attract pension plans to invest, the share of plan assets that might go to infrastructure would likely be small; and (5) the federal capitalization of state revolving funds may be an option to expand infrastructure investment without relying on pension plans.
Pursuant to congressional requests, GAO provided information on the: (1) Employee Retirement Income Security Act's (ERISA) relationship to the current system of employer-based health coverage; (2) implications of the trend toward employer self-funding on the oversight of employees' health care coverage; (3) kinds of state actions preempted by ERISA; and (4) advantages of ERISA preemption to employers that offer health care coverage to their workers.GAO found that: (1) although historically courts have interpreted ERISA to broadly restrict state regulation of employer health plans, recent Supreme Court decisions may allow states greater flexibility under general health care regulation provisions; (2) self-funded employer health plans appear to be increasing, but many employers are moderating their risks by using stop-loss coverage or managed care arrangements; (3) about 40 percent of ERISA plans, which cover about 44 million people, are employer self-funded plans which states are preempted from regulating and taxing because they are not considered to be insurance; (4) other ERISA plans cover an additional 27 percent of the U.S. population; (5) states believe that ERISA impedes their ability to ensure adequate consumer protections and enact health cost reduction reforms; (6) states also believe that they should be able to tax and collect data on all health plan participants uniformly; (6) employers believe that ERISA has made it possible for them to offer their employees health care coverage tailored to their needs and thus reduce their costs; and (7) employers fear that changes to ERISA that would give states greater regulatory flexibility would increase their costs and jeopardize their ability to provide employee health coverage.
Pursuant to a congressional request, GAO provided information on state legislation to improve portability, access, and rating practices for the small-employer and individual health insurance markets.GAO found that: (1) no state entirely adopted the National Association of Insurance Commissioners' (NAIC) model small-employer health insurance act; (2) the states did not consistently define small employers, eligible employees, carriers, and noncarrier groups offering small-employer insurance; (3) only 20 states included the self-employed, and not all of those states extended all provisions to that group; (4) 15 states passed some type of individual market reform, and 10 closely applied their small-employer reforms to their individual reforms; (5) states had the most difficulty in defining noncarrier groups offering insurance; (6) most states included limitations on preexisting condition exclusions and portability requirements, but differed on the length of the waiting period; (7) most states restricted insurer rating practices, but either significantly changed the NAIC model provisions or used a different approach; (8) states' approaches to rate determinations, permissible premium variations, and the number of carriers' business classes varied significantly; and (9) NAIC amended its model act to redefine small-employers to include the self-employed.
The retirement benefits provided by the Civil Service Retirement System for Members of Congress are generally more generous than those provided for other federal employees. The major differences are found in the eligibility requirements for retirement and the formulas used to calculate benefits. The Member benefit formula applies to congressional staff, but they are covered by the general employee retirement eligibility requirements. Law enforcement officers and firefighters may retire earlier than general employees and are covered by a more generous benefit formula than are general employees. Under the Civil Service Retirement System, the provisions for air traffic controllers fall between those for law enforcement officers and firefighters and those for general employees. Many of the advantages afforded to Members of Congress and congressional staff under the Civil Service Retirement System were continued under the Federal Employees Retirement System, which covers workers hired in 1984 and thereafter. But under the Federal Employee Retirement System, provisions for law enforcement officers, firefighters, and air traffic controllers are very similar to provisions for Members. GAO summarized this report in testimony before Congress; see Congressional Retirement Issues, (GAO/T-GGD-95-165, May 15, 1995), by Johnny C. Finch, Assistant Comptroller General for General Government Programs, before the Subcommittee on Post Office and Civil Service, Senate Committee on Governmental Affairs.
Governments at all levels are increasingly looking to the nearly $4 trillion held as of 1992 by the nation's private and public pension plans to fund public needs through economically targeted investments (ETI). In fact, several state and local government employee pension plans have implemented ETI programs. Critics have raised concerns that plan participants may lose their retirement savings through economically dubious but politically expedient investments, requiring increased taxation and reductions in other needed spending to pay the costs. They cite widely publicized cases in Alaska, Connecticut, and Kansas, where public employee pension plans have lost millions of dollars through ETIs that went bad. This report answers the following three questions: What has been the extent of ETIs by nonfederal public employee pension plans, in terms of amounts invested and the types of investments? Did ETI programs aimed at business development realize competitive returns? What were the economic effects of business development ETI programs, such as jobs created?
The Department of Labor's Pension and Welfare Benefits Administration (PWBA) is responsible for enforcing provisions of the Employee Retirement Income Security Act of 1974 (ERISA), the federal program to protect an estimated 200 million participants and beneficiaries of private pension and welfare plans, as well as the $2.5 trillion in assets held by those plans. A review of Labor's enforcement program shows improvements since 1986, but also the need to strengthen enforcement by taking steps to ensure maximum use of investigative resources. PWBA has never evaluated its current enforcement strategy; such an evaluation is needed to determine whether PWBA is focusing on the right issues and whether the strategy produces the greatest results. In addition, PWBA has done little to assess the effectiveness of computer targeting programs developed to systematically select pension and welfare plans for investigation of potential fiduciary violations. The enforcement program also can be strengthened by increasing the use of penalties authorized by ERISA to deter plans from violating the law.