Accounting for the Cost of Pension Plans Valuation. See actuarial valuation, Appendix A. 103 Vested Benefits. Benefits that are not contingent on the employee's continuing in the service of the employer. In some plans the payment of the benefits will begin only when the employee reaches the normal retirement date; in other plans the payment of the benefits will begin when the employee retires (which may be before or after the normal retirement date). The actuarially computed value of vested benefits, as used in this Opinion, represents the present value, at the date of determination, of the sum of (a) the benefits expected to become payable to former employees who have retired, or who have terminated service with vested rights, at the date of determination; and (b) the benefits, based on service rendered prior to the date of determination, expected to become payable at future dates to present employees, taking into account the probable time that employees will retire, at the vesting percentages applicable at the date of determination. The determination of vested benefits is not affected by other conditions, such as inadequacy of the pension fund, which may prevent the employee from receiving the vested benefits. Withdrawal. The removal of an employee from coverage under a pension plan for a reason other than death or retirement. See turnover. SUPPLEMENTAL VIEWS OF MR. JAVITS The information and facts contained in this report add an important chapter to the subcommittee's investigation of the private pension plan system in America today. A worker's unexpected loss of retirement benefits due to a pension plan's voluntary or involuntary termination is a continuing tragedy that must have the attention of Congress if it is to write meaningful pension reform legislation. If anyone questions the presence today of lost benefits through plan terminations, I direct their attention to the testimony of American working men and women before this subcommittee in cities throughout this nation. In every case, had there been adequate funding and insurance to protect vested rights, a worker's retirement or expectation of retirement would not have become a bitter experience. As the subcommittee has shown, the personal tragedies arising from pension plan terminations are not confined to one particular geographical sector or industry. These selective hearings represent only the more critical examples investigated by the subcommittee staff. In my home State of New York I have received hundreds of letters from disenchanted workers who have lost retirement benefits because their pension plan was terminated. A case in point is exemplified in the termination of the Wickwire Bros. Corp. hourly pension plan. This family run company, established in the early 1800's in Courtland, New York, was purchased in 1968 by Keystone Consolidated Industries of Peoria, Ill. Keystone operated Wickwire as a subsidiary until May of 1970 when it was closed and liquidated as an uneconomical business. The hourly pension plan was terminated May 31, 1971. After 22 years existence, the plan's assets were sufficient to provide, by a lump sum payment, less than 20 percent of the pension benefits due to 220 Wickwire retirees. Upon inquiry to the New York District Director of the Internal Revenue Service, I have learned of an almost tenfold increase of pension plan terminations in New York filed with the Internal Revenue Service within the past 2 fiscal years. In 1970, 56 plans filed terminations versus 525 in 1972. Of course, there is no magic in numbers when a worker's just retirement expectations are destroyed by circumstances beyond his control. Whether it be 5,000 or 50,000 working Americans who each year suffer drastic economic misfortunes through plan terminations is secondary. Congress cannot and should not delay legislation for want of further data on the absolutely precise extent of plan termination losses. Sufficient evidence is contained in this subcommittee report to warrant the conclusion that any reform that fails to incorporate a Federal program of funding and termination insurance is unfair, will be ineffective, and undermines the integrity of the private pension system in the eyes of millions of workers. Piecemeal reform of pension plans is wrong; comprehensive reform, which I have urged since 1967, is right and necessary. JACOB K. JAVITS. O |