such requirements is tantamount to having no eligibility requirements at all. Private Retirement programs should be created for the benefit of employees who may be considered by the employer to be reasonably permanent, unless more liberal requirements are negotiated through collective bargaining. Employers should not be required to fund benefits for employees who have not demonstrated the permanent nature of their employment. I feel, generally, that an employee has established his permanence after 3 years of employment and age 25. These should be the required eligibility standards for an employee to participate in a retirement plan. Pension Credit can still be given for the early years of employment before meeting the requirements, but the employer is relieved of the duty of keeping pension records for very short term employees.

Furthermore, the Bill makes no provision for what I consider to be an absolute necessity in adequate pension reform - that is with respect to employees hired at older ages. Many pension plans exclude employees hired after age 55 or age 60, or some other higher age, in order to keep the employer cost of providing pension benefits down. This practice would continue to be allowed under this Bill. It should not. We should encourage mobility among older employees; not only by adequate vesting under the pension plan they leave, but by requiring that they participate in the plan of any new employer. There is something to be said in favor

of employers' reluctance to hire older employees if they must enter into costly funding for his retirement income. This can be overcome simply by allowing plans to require 10 years participation for a full retirement benefit. This is sufficient time for an employer to fund his benefit without a burdensome cost and yet does not eliminate the employee from the plan entirely. Permission for plans to have maximum age exclusions should be eliminated. A full pension could be allowed after 10 years of participation. When combined with minimum vesting provisions this would add benefit security and encourage mobility among that segment of the work

force near retirement.

The Vesting Schedule proposed by S. 3598 seems to be a compromise between several previous bills, none of which was adequate. It provides 30% vesting after 8 years of service and 10% for each additional year of service. Why 30% and why 8 years?

This portion, more than any other part of pension legislation, must have a purpose. It must be designed to meet the objective of providing reasonable termination benefits without an undue cost burden. There are

several concepts that automatically suggest a vesting provision somewhat different than the one in S. 3598.

First, vesting should be weighted in favor of older employees, as

well as in favor of long-service employees. I believe that the shortness of an employee's service until retirement is as important as the length of the time since he was hired. These criteria are met by setting the time of vesting in terms of the sum of age and years of participation in a plan. When an employee's age plus his years of participation total 50, I believe vesting should begin.

Secondly, any vested benefit should be stated in terms of an employee's full accrued benefit under the plan for all years of service with his present employer. There is no added benefit security under S. 3598 for employees now at an advanced age. That bill vests only a percentage of the benefits which are accrued after the date legislation is effective. Viewed from the eyes of a 60-year old employee with 30 years of service, it is misleading to title this Bill "Retirement Income Security for Employees Act". Little retirement income security is provided the present working generation by vesting only benefits earned after the effective date of legislation.

fund for vested benefits.

Thirdly, consideration should be given to the employer's ability to Little is given in the provisions of S. 3598. The employer's funding schedule should be tied to the concept that any employer could accept and should be allowed 10 years of an employee's participation to fully fund his benefit. This corresponds closely with the previous proposal allowing an employer 10 years to fund a benefit for an older employee.

Now, in light of the above, just what vesting provisions should be

required:

so adequate weight is given to age as well as service,

so the present older working population is not ignored,

so employers can fund for vested benefits on a regular

basis?

We propose the following: That vesting be required when an employee's age plus his years of participation after the date of this legis lation, equals 50; that his vesting be based on his full accrued benefit for all service, and that the initial vesting percentage be 10%, increasing by 10% for each additional year of participation.

The proposed Senate Bill S. 3598 includes minimum funding requirements. It requires that normal service costs must be met annually and initial unfunded liabilities on the effective date must be funded over 40 years. While this is not a strict requirement by any means, there seems to be no purpose for it. It merely adds an administrative headache to the regulating agency and to pension plan sponsors. No benefit security is added by minimum funding requirements if vesting is required and if the unfunded vested liabilities must be insured. How can benefits be any more secure than to guarantee them upon termination of employment (by vesting) and also to guarantee them upon termination of the plan (by

insurance). I recommend that there be no minimum funding requirements on the basis that it serves no useful purpose.

Another feature of S. 3598 is portability of vested pensions whereby the value of vested pensions could be paid to a central portability fund and subsequently transferred to another fund or used to purchase an annuity contract from a life insurance company for the participant. This feature, like the minimum funding provision, is unnecessary. If a person has a vested pension it is of little significance from whom he receives his payment. With adequate vesting requirements, portability loses its significance and should be eliminated from this Bill. Administrative problems arise with a central portability fund when the value to be transferred to the central fund for a certain vested pension is greater than the amount required to provide an identical benefit through a trust fund or an annuity contract.

My negative attitude regarding S. 3598 is only with respect to those provisions I already discussed. I should like to emphasize my positive feelings about some other parts of this Bill.

This Bill requires that a certificate of rights be issued to each terminating participant who has vested rights. I believe this is absolutely necessary and is properly included in any pension reform bill.