The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Health and Insurance Benefits and
Pension Plans for Salaried Employees,
Spring 1963
Bulletin Mo. 1405
UNITED STATES DEPARTMENT OF LABOR
W. Willard Wirtz, Secretary
B U R E A U O F LA B O R S T A T I S T I C S
Ewan Clague, Commissioner
Health and Insurance Benefits and
Pension Plans for Salaried Employees,
Spring 1963
Bulletin No. 1405
M ay 1964
UNITED STATES DEPARTMENT OF LABOR
W . Willard Wirtz, Secretary
BUREAU O F LABOR STATISTICS
Ewan Clague, Commissioner
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D .C., 2 0 4 0 2 - Price 20 cents
Preface
In spring 1963, the Bureau o f Labor S ta tistic s co m p ile d two d igests o f s e
le c te d b e n e fit plan s for sa la rie d em p lo y e es: One for 50 pension p lan s (BLS B u lletin
1373) and another for 50 h ealth and insurance plan s (BLS B u lletin 1377). T o f a c i l i
ta te com parison s, th ese digests g e n e ra lly fo llow ed the fo rm at of sim ila r digests for
n eg o tia ted plan s (BLS B ulletin s 1307 and 1330).
The p rin cip a l featu res of the sa la rie d em p lo y e es' plans represen ted in the
d igests h ave b een su m m arized in two a rtic le s th at ap p eared in the M onthly Labor
R ev iew for N ovem ber 1963 and Janu ary 1964, re sp e c tiv e ly . T h ese a rtic le s are r e
printed in this b u lle tin to m ak e th em co n ven ien tly a v a ila b le to a w ider au d ien c e.
T h ese stu dies w ere cond ucted in the Bureau's D ivision of Industrial and
Labor R e la tio n s, by Joseph W. Bloch, C h ie f of the D ivision , under the g e n e ra l d i
re ctio n of L. R . L insen m ayer, A ssistant C om m ission er for W ages and Industrial
R e la tio n s.
T h e an aly sis o f h ealth and insurance plan s w as prep ared by Arne H.
A nderson and W illiam F. Hahn; of pension plan s, by Harry E. D avis; under the
su pervision of D on ald M. Landay.
Contents
Page
H ealth and insuran ce b en efits -------------------------------------------------------------------------------------------A c tiv e e m p lo y e e s' and dependents' ben efits -------------------------------------------------------------------L ife insurance --------------------------------------------------------------------------------------------------------A c c id e n ta l death and dism em b erm en t b en efits -----------------------------------------------------------T em p orary d isab ility b e n e f i t s -----------------------------------------------------------------------------------H ospital b e n e f i t s -----------------------------------------------------------------------------------------------------S u rg ic a l b e n e f i t s -----------------------------------------------------------------------------------------------------B asic m e d ic a l b e n e f i t s ---------------------------------------------------------------------------------------------M ajor m e d ic a l b en efits -------------------------------------------------------------------------------------------M aternity b e n e f i t s --------------------------------------------Benefits for retirees and d e p e n d e n ts--------------------------------------------------------------------------------L ife in su ra n c e ---------------------------------------------H ospital b e n e f i t s ------- ---------------------------------------------------------------------------------------------S u rg ic a l b e n e f i t s ------------------------------------------------------------------------- ,---------------------------B asic m e d ic a l b e n e f i t s ---------------------------------------------------------------------------------------------M ajor m e d ic a l b en efits -------------------------------------------------------------------------------------------Pension p la n s -------------------------------------------------------------------------------------------------------------------N orm al r e t ir e m e n t ------------------------------------------------------------------------------------------------------Early r e t ir e m e n t ----------------------------------------------------------------------------------------------------------D isab ility r e t ir e m e n t ---------------------------------------------------------------------------------------------------V e s t in g ----------------------------------------------------------------------------------------------------------------------Benefits for survivors ---------------------------------------------------------------------------------------------------F in an cial asp ects ---------------------------------------------------------------------------------------------------------
V
1
2
2
3
3
4
5
5
6
7
8
8
8
9
9
9
10
10
12
12
12
13
13
Health and In su ra n c e B en efits and Pension P la n s
for S a la r ie s E m ployees, Sp rin g 1 9 6 3
H ealth and In su ran ce B e n e fits
out of 5 extended this benefit to retirees. With
few exceptions, hospital and surgical benefits were
also provided active employees and their depend
ents. Retired employees and their dependents
were covered by hospital and surgical benefits by
less than half of the plans. About the same pro
portion of plans extended major medical benefits
to retirees and their dependents, although 4 out
of 5 plans provided this benefit for active em
ployees and their dependents. Major medical
benefits were always provided for active employees
and, with one exception, their dependents, where
hospital, surgical and/or medical benefits were
S a l a r ie d e m p l o y e e s generally have broader health
and insurance coverage than production workers,
but more often pay part of the cost. They usually
have larger life insurance and accidental death and
dismemberment benefits, especially where they
may purchase additional insurance in an amount
related to their earnings. Although their basic
health benefits (hospital, surgical, and medical)
are usually the same as those for production work
ers, they often have more comprehensive health
coverage because most of their plans also include
major medical benefits, which are relatively un
common in production workers’ plans. These are
some of the significant differences noted in a com
parison of the health and insurance programs sum
marized in the Bureau’s forthcoming digest of 50
salaried employees’ plans with the programs for
production workers analyzed in other recent Bu
reau reports.1
The 50 health and insurance plans ranged in size
from about one thousand to several hundred thou
sand employees. They were selected to illustrate
the various types of coverage available to salaried
employees of one or more of the major companies
in each industry.24* Although the plans were not
selected as a representative sample, the benefits
provided are indicative of the types and levels of
benefits available to salaried employees in large
companies.*
Participation in some plans studied was auto
matic; the employee and his dependents were
covered immediately upon commencement of his
employment. Most plans, however, required the
employee to work from 1 to 6 months before he
could participate in the plan.
A typical health and insurance program for sal
aried employees * provides many types of protec
tion for both active and retired employees and
their dependents.5 All of the plans studied pro
vided life insurance for active employees, and 4
1 Digest of 50 Selected Health and Insurance Plans for Salaried
Employees, Spring 1955 (BLS Bulletin 1377), and Digest of
One Hundred Selected Health and Insurance {Plans Under
Collective Bargaining, Winter 1961-62 (BLS Bulletin 1330).
The'Bureau’s earlier analysis of production worker plans
also bear out this conclusion. See Health and Insurance Plans
Under Collective Bargaining: Life Insurance and Accidental
Death and Dismemberment Benefits, Early Summer I960 (BLS
Bulletin 1296) ; Major Medical Benefits, Fall I960 (BLS Bulletin
1293) ; Surgical and Medical Benefits, Late Summer 1959 (BLS
Bulletin 1280) ; Hospital Benefits, Early 1959 (BLS Bulletin
1274) ; Accident and Sickness Benefits, Fall 1958 (BLS Bulletin
1260).
a The names of the companies selected are given in BLS
Bulletin 1377.
* Although many plans made available identical benefits to all
salaried employees of a company, under some plans one or more of
the benefits varied according to an employee's classification, geo
graphic location, or both. For this article, where variations with
in a plan occurred, the benefits and provisions analyzed were those
available to the largest group of salaried employees.
4 Salaried employee programs analyzed in this article covered
professional, technical, administrative, clerical, and sales workers
and, in many cases, executives as well.
• For a description of the various benefits provided by a plan,
see the Bureau publications listed in footnote 1, and Paid Sick
Leave Provisions in Major Union Contracts, 1959 (BLS Bulletin
1282).
Paid sick leave benefits, where formalized, are discussed in this
article, because of the common practice in private industry to
continue a salaried employee’s pay during an absence as a supple
ment to, or in lieu of, weekly accident and sickness benefits. How
ever, as in other Bureau reports, informal arrangements are not
accounted for.
“Dependents” include the employee’s spouse and children under
a specified age, usually age 19.
The term “ retired worker” as used in this article does not neces
sarily cover all pensioners. Employees retired before the exten
sion of benefits to pensioners and those not meeting the prescribed
eligibility requirements may not be covered by a plan.
l
2
not included. On the other hand, only seven of
the plans without any basic health benefits and
four without one or more of the basic health bene
fits for retired employees and their dependents
included major medical benefits for them. Thirtynine plans included temporary disability benefits.®
Salaried employees, unlike production workers,
usually had to pay part of the cost of their bene
fits.7 The employer paid the full cost of all em
ployees’ benefits in only 1 out of 7 plans: all
dependents’ benefits were paid for entirely by the
employer in a slightly higher proportion of plans
(1 out of 5). For retired workers and their de
pendents, however, employers more commonly
paid the full cost. In about 1 out of 4 of the
plans extending benefits to retired workers and
to their dependents, employers assumed the entire
cost of all the extended coverages.
Active workers’ benefits whose cost is related
to the employee’s salary level—life insurance, ac
cidental death and dismemberment, and major
medical benefits—were usually jointly financed,
while those not related to earnings—hospital, sur
gical, and basic medical benefits—were usually
entirely employer-financed.8 However, tempo
rary disability benefits (accident and sickness and
sick leave), although their cost varies with earn
ings, were usually employer-financed, because sick
leave is always employer-financed. About 4 out
« The omission of these benefits from 11 plans was probably due
to employees being covered by informal sick leave arrangements
which are outside of the scope of this article and by statutory
benefits in States with temporary disability benefit laws.
•t The package of benefits for each group of insured individuals
(active employees, dependents of active employees, retired em
ployees and dependents of retired employees) was classified as
jointly financed if the worker contributed toward the cost of one
or more of the benefits included in the package or if he made a
general contribution toward the cost of all benefits.
«For plans where the allocation of employee contributions to
specified benefits was not stated, each individual benefit was clas
sified as jointly financed.
• If supplementary (optional) life insurance was excluded, the
plans were nearly equally divided between employer and joint
financing. However, because 10 plans provide employer-financed
basic coverage and jointly financed supplementary coverage, and
5 plans provide employer-financed basic coverage and employeefinanced supplementary coverage, nearly 4 out of 5 were jointly
financed when supplementary benefits were included.
10 The sections on life insurance, accidental death and dismem
berment, and temporary disability benefits relate only to benefits
provided the active employees. Only one plan provided a life in
surance benefit for dependents. Temporary disability benefits,
which depend on active employment, and accidental death and
dismemberment benefits were not extended to dependents.
“ The total amount of life insurance consists of the amount of
basic coverage plus, where provided, the amount of supplementary
(additional) insurance available to employees.
of 5 of the plans required the employee to pay
part of tjie cost of his total life insurance cover
age.9 A smaller proportion of plans (less than
3 out of 5) provided jointly financed accidental
death and dismemberment and major medical
benefits. In contrast, employer-financed tempo
rary disability and basic medical benefits were
provided by 7 out of 10 of the plans, and employerfinanced hospital and surgical benefits, by over
half of the plans. Except for major medical
benefits, the employee was seldom required to pay
the full cost of any of his benefits.
Active employees contributed to the cost of their
dependents’ benefits more often than they did to
their own. Dependents’ benefits were jointly fi
nanced by about half of the plans, and in most of
the remaining plans the employer paid the entire
cost of the basic health care benefits. The cost of
major medical benefits, however, was borne entire
ly by the employee in about the same number of
plans as it was borne entirely by the employer.
The financing of health benefits for retired em
ployees and their dependents followed the pattern
of financing of benefits for dependents of active
workers, except that major medical benefits were
employee-financed, rather than jointly financed, in
about half the plans;. On the other hand, life in
surance, which was usually jointly financed for ac
tive workers, was usually company-financed when
extended to retired workers.
Active Employees’ and Dependents’ Benefits 10
Life Insurance. All 50 plans included a life in
surance benefit for salaried employees. Usually,
the total amount of coverage for each worker was
determined by his salary (44 plans).11 Some
plans, however, provided either a uniform benefit
for all employees, regardless of salary (three
plans), or varied the amount according to the
employee’s length of service (three plans). Where
both basic and optional supplementary coverages
were available, usually both were geared to earn
ings. The practice of providing total life insur
ance coverage based on salary is more common
among salaried employees’ plans than among pro
duction workers’ pis,ns.
The total amount of insurance provided under
the graduated-by-salary plans, including both
basic and supplementary coverage, varied greatly.
3
For the $5,000-a-year employee,12* it ranged from
a low of $4,000 to a high of $15,000, and averaged
about $9,000.IS61 For basic alone, the average bene
fit was about $7,000.
Salaried employees often have significantly
higher life insurance coverage than production
workers in the same company.14 To illustrate, the
$5,000-a-year white-collar worker at Pittsburgh
Plate Glass Co., whose benefit was related to his
salary level, had a life insurance benefit of $15,000,
while a $5,000-a-year production worker employed
at that company, whose coverage would be the
same regardless of what he earned, had $5,000
coverage. However, the salaried employee con
tributed to the cost of his insurance coverage and
the production worker did not.
Women employees were usually eligible for the
same amount of coverage as men. Only four
plans afforded women workers earning $5,000 or
more annually less protection than was made avail
able to males at the same salary level.
Unless his salary changed, the amount of life
insurance, under most plans, remained the same
for the active worker during his entire period of
employment, regardless of his age. Eleven of the
plans studied, however, reduced benefits for the
older employees. The age of reduction was most
frequently 65, although it ranged from 55 to 68.
Under some plans, the benefits were reduced by a
single reduction at a specified age, but usually they
were decreased gradually at regular intervals un
til minimum amounts were reached. These mini
mum amounts were maintained for the duration of
the worker’s active employment.15
Temporary Disability Benefits** About fourfifths of the plans provided temporary disability
benefits for salaried workers—a somewhat
smaller proportion than among production work
er plans. About a third of the plans had only
accident and sickness benefits, a fifth only sick
leave, and another fifth both. The benefits for
salaried workers were, in general, more liberal
than those available to production workers be
cause sick leave plans were more prevalent and
because combined plans—the most generous
type—were also relatively more common.
Weekly accident and sickness benefits in all but
6 of the 27 plans were based on employees’ earn
ings. The weekly benefits provided the $5,000-ayear worker ranged from $40 to $70 and averaged
about $55 or approximately 57 percent of the
employee’s weekly salary.17 The six uniform
benefit plans paid smaller benefits than the gradedby-salary plans; their average weekly benefit was
only $33.75—about one-third of the weekly salary
of a worker earning $5,000 annually. Neverthe
less, salaried employee benefits were, on the whole,
slightly higher than those for production workers
at the same earnings level. Only two plans, both
with uniform benefits, paid smaller benefits to
women than to men.
In half of the plans, benefits were immediately
payable if the disability was caused by a nonoccu
pational accident. The remaining plans specified
a waiting period for nonoccupational accident ben
efits ranging from 3 to 21 days—most frequently 7
days. The waiting period for sickness benefits was
Accidental Death and Dismemberment Benefits.
The accidental death and dismemberment benefits
provided by 32 plans were always payable in addi
tion to the life insurance benefit. However, in nine
plans, no benefit was payable if death or disability
resulted from a job-connected accident and in three
plans, if it resulted from a nonoccupational acci
dent. In most plans, the amount of the accidental
death and dismemberment benefit was determined
by the salary level.
w In order to facilitate the analysis of salaried employees' bene
fits and, where appropriate, the comparison of salary and produc
tion workers' plans, benefits were computed at an earnings level
typical of both groups—$5,000 a year. The amounts shown in
this article for those employees under graduated plans would not
be applicable to employees at other salary levels.
18 All averages cited in this article were computed by giving
equal weight to the amount provided by each plan.
14 A recent survey by the National Industrial Conference Board
reached the same conclusion. See Management Record, November
1962, pp. 3-5.
18 Under these 11 plans, newly hired older workers also received
less coverage than that available to younger employees. One ad
ditional plan reduced the amount of insurance available to em
ployees becoming insured after age 45 but did not reduce the
coverage of employees hired before that age.
16 This analysis is limited to nonoccupational accident and sick
ness benefits and sick leave. Benefits for occupational disabilities
are omitted because coverage is often provided in other ways such
as through workmen's compensation.
17 Nine of these plans also contained provisions for paid sick
leave benefits, which, with few exceptions, supplemented accident
and sickness benefits.
The amounts of accidental death benefit and
basic life insurance were often equal. However,
supplementary life insurance was often not
matched by a like amount of accidental death
coverage.
732-376 0-64—2
4
often more restrictive. With two exceptions, the
commencement of sickness benefits was delayed
until after the employee was absent for 3 to 21
days—usually 7 days. Under several plans, how
ever, waiting periods were waived if the worker
was hospitalized during the waiting period.
The weekly accident and sickness benefit of most
of the plans were payable for at least 26 weeks per
disability. Only three plans provided the benefit
for a shorter period (13 weeks).
The amount of the accident and sickness benefit
remained unchanged during the entire period of
active employment, regardless of the age of the
employee. Four plans, however, placed a limit on
the number of weeks per year for which benefits
would be paid after an employee reached age 60.
Extended disability benefits—benefits payable in
addition to basic accident and sickness benefits—
were included in two plans for employees absent
because of a long-lasting disability. Both the
Aluminum Co. of America and the Campbell
Soup Co. programs paid workers disabled through
sickness or accident for at least 6 months 40 and
50 percent of their base salary, respectively, until
age 65. Other companies granted benefits for ex
tended disabilities through their pension pro
grams.18
Paid sick leave was provided by 21 of the plans.
Nine plans with paid sick leave also provided
weekly accident and sickness benefits. Usually
sick leave payments were reduced by the amount
of the accident and sickness benefit, or payments of
the latter began after the expiration of the former.
Salaried employees were usually eligible for sick
leave pay either immediately or within 3 months
after their employment. However, three plans re
quired a year’s employment and one required 2
years. There was no noticeable difference in the
minimum service requirements of plans with uni
form benefit periods and the plans relating the
benefit to the employee’s length of service.
MSee BLS Bulletin 1373, Digest of Fifty Selected Pension
Plans for Salaried Employees, Spring 1963, tor permanent
and total disability benefits of the salaried employee pension
plans of the same companies whose health and insurance plans
were digested in BLS Bulletin 1377.
19 Different benefits were provided employees and dependents by
five plans, including two covering employees in California. The
two California plans provided different benefits for employees
than for dependents during the first 20 days of hospitalization,
because employees, in addition to being eligible for the plans*
benefits, were eligible during this period for the $12-a-day benefit
provided under the State’s temporary disability law.
Salaried employees covered by the eight plans
with a uniform benefit period were paid for tem
porary disability absences ranging from 1 to
26 weeks. Three plans with brief benefit periods
of 1 or 2 weeks were supplemented by accident and
sickness benefits; longer benefit periods (4,8, or 26
weeks) were stipulated by all but one of the plans
without accident and sickness benefits. Full pay
was provided for the entire benefit period by 7 out
of 8 plans. Under the remaining plan, full salary
was paid for 13 weeks and half salary for an addi
tional 13 weeks.
The graduated-bv-service benefit found in 13
plans was frequently more complex than the uni
form benefit. For example, several of the gradu
ated paid sick leave plans, in addition to compen
sating employees meeting the minimum service
requirements with full pay during specified peri
ods of absences, extended benefits for additional
periods at less than full pay.
Disabled employees who had only the minimum
service required by plans with a graduated-by
service benefit were granted full pay for 1 week
per year (five plans), for 2 weeks (seven plans),
or for 8 weeks (one plan). Employees attaining
the maximum service credited by these plans (5 to
25 years) were given full pay for much longer
periods, usually 12 weeks or more.
Hospital Benefits. Basic hospital benefits for nonmaternity disabilities were provided salaried em
ployees and their dependents by all plans except
the three that provided comprehensive major med
ical benefits instead. With few exceptions, both
employees and their dependents were accorded
identical benefits.19 Service benefits were included
in 26 plans, cash allowances in 16, and service
room-and-board benefits plus cash allowances for
ancillary services in 4.
The period during which full benefits were pay
able ranged from 21 days to 730 days—usually not
less than 70 days. All of the plans with full-bene
fit periods of 21 days and a few others had ex
tended coverage periods ranging from, 50 to 180
days (most frequently 180 days) during which a
fraction (usually half) of the full benefits were
payable. The duration of hospital benefits was
generally longer in service plans than in cash
plans. For example, a full-benefit period of at
least 70 days was available in about three-fourths
5
of the service benefit plans but in only two-fifths
of the cash plans.
The 30 plans with service room-and-board bene
fits paid the full cost of semiprivate room accom
modations during the full-benefit period. Dur
ing the extended coverage period included in 11
of these plans, the daily benefit was, with one ex
ception, half of the semiprivate room charge.
Fifteen of the 17 plans with cash room-and-board
benefits paid daily allowances during the fullbenefit period that ranged from $12 to $20 for
employees and from $10 to $32 for dependents.
They averaged $14 for employees and $13 for de
pendents. Plans of the International Business
Machines Corp. and of Safeway Stores provided
benefits on a coinsurance basis, i.e., they paid al
lowances of 75 and 80 percent, respectively, of the
daily semiprivate room rate prevailing in the hos
pital used by the patient.
Hospital charges for ancillary services were cov
ered, at least partially, by both the service and
cash benefit plans. The 27 service plans paid the
full cost of specified services during the full-bene
fit period and part of it (usually 50 percent) dur
ing extended coverage periods. The cash plans,
on the other hand, provided for the full reim
bursement of the cost of all extra services up to a
stated maximum or provided for the full payment
up to a certain level with additional reimburse
ment on a percentage basis (e.g., up to $200 in full
plus 75 percent of the next $2,000 of charges).
In the 13 plans paying full reimbursements up
to a fixed maximum amount, the maximums were,
with one exception, less than $400 and averaged
$257 for employees and $202 for dependents. The
full reimbursements provided by the five plans
making further reimbursements on a percentage
basis averaged $262 for each group.
Surgical Benefits. Basic surgical benefits were in
cluded in all but five plans, which covered surgical
fees solely through their major medical benefits
plans. Most of the surgical plans provided uni
form cash benefits to all employees (32 plans) and
their dependents (31 plans) regardless of their in
come. Twelve plans provided service benefits to
employees and their dependents with incomes be
low certain limits; 20 all others received uniform
cash benefits. Half of these service plans limited
service benefits to employees with a family income
of under $4,000 or, if single, of $2,500. The rest
had higher income limits ($7,500 for both single
and married employees was usually the maxi
mum). One plan provided service benefits irre
spective of employee income.
While the “maximum schedule allowance”—the
allowance provided for the most expensive opera
tion—ranged from $150 to $825, most plans pro
vided a maximum of $250 or $300. The allowance
for an appendectomy, one of the most common
surgical procedures, varied from $100 to $220, and
most frequently was $125 or $150, or about half the
maximum schedule allowances.
Basic Medical Benefits. Basic medical benefits—
reimbursements for doctor visits not involving
surgery or obstetrics—provided salaried employ
ees were included in 34 plans and for their de
pendents in 31. All 16 plans without basic medi
cal benefits for employees and 18 out of the 19
without such benefits for dependents partly re
imbursed employees for doctor bills by providing
major medical benefits. Doctor visits in the hos
pital were reimbursed, at least in part, by all plans
with basic medical benefits. Home and office visits
for employees were also reimbursed by eight plans
and for dependents by two plans.
Most of the plans provided cash benefits. The
10 service-with-income-limits medical plans, like
the associated surgical plans, gave service bene
fits 21 only to employees and dependents with in
comes below a specified amount—usually $2,500 a
year for individual and $4,000 a year for those
with family coverage. Employees whose income
fell within stipulated limits were given these bene
fits for a specified number of visits; they had to
pay the cost of additional visits.
With three exceptions, benefits for hospital
visits began immediately. Of the eight plans pro
viding employees with home and office care of
accident disabilities, all but two provided imme
diate coverage. However, in the case of sickness
disabilities, a short waiting period of not more
than 3 days was required by most plans before
benefits began.
The benefit amounts varied according to loca
tion of the visit (e.g., The Crown Zellerbach
120Doctors agreed to accept as full payment the schedule allow
ances if the annual income of the insured was below a specified
amount,
saibid.
6
Corp. plan provided $8 per day fo r v isits in the
hospital, $1 fo r office visits, and $6 fo r home
v isits). The daily in-hospital allowances avail
able to employees were typically $3 and $4 (10
plan s each) and $5 (8 p lan s).82 F o r dependents
they were usually $3 (7 p la n s),$4 (10 p lan s), and
$5 (8 p lan s). Office v isit allowances were some
what lower, ranging between $2 and $4 per visit.
F o r home v isits they were usually $3 or $5.
B asic m edical benefits were provided fo r a
specified number o f v isits per disability. The inhospital benefits, as a rule, were allowed only fo r
v isits on days fo r which hospital benefits were pay
able. The maximum amount allow able fo r any one
illness, which depends on the per v isit allowance
and the length o f the period during which it w as
payable, ranged from $93 to $2,190. The m edian
w as $450.
M ajor M edical Benefits. M ajor m edical benefits
fo r salaried employees and their dependents were
found in 40 o f the 50 plans. In 37 plans it supple
mented basic health benefits (supplem entary
m ajor m edical) and in 3 plan s it w as the only
health benefit provided (comprehensive m ajor
m edical).
W ith four exceptions, the insured had to pay in
fu ll fo r the in itial p art o f all his fam ily’s personal
health care expenses not provided by the plan’s
basic hospital-surgical-m edical benefits—the “ de
ductible”—before m ajor m edical benefits were
paid. In 33 plans, a “ corridor” deductible w as
specified; th at is, the deductible w as the
amount o f health care expenses in excess o f that
covered by the basic benefits, which the insured
had to pay in fu ll. F ou r plan s had an “ inte
grated” deductible, computed by subtracting the
value o f the basic benefits used from the deductible
amount.
A uniform deductible—an amount payable by
the insured regardless o f h is income—was speci
fied in 2 out o f 3 o f the plans. In the other plans,
the amount o f the deductible depended on the *
** The higher-than-usnal allowances for the first few visits or
days found in a few plans have been ignored; and the lower
amounts, which applied subsequently, were used in these tabula
tions. However, the higher amounts were used if the plans first
provided a higher allowance for an extended number of visits and
later a reduced amount.
** Where the deductible was dependent on earnings, the amount
applicable to the employee earning $5,000 annually has been used
in the text.
insured’s annual income.2* F o r employees with
annual salaries o f $5,000 and their dependents, the
deductibles ranged from $25 to $500. F ou r plans
with deductibles o f $25, $50, $62.50, and $100 did
not subject hospital and surgical expenses to the
deductible (i.e., coinsurance w as imm ediately pay
able fo r these expenses), and two plans with m axi
mum deductibles o f $50 and $100 specified lower
deductibles fo r hospital expenses than fo r other
health care expenses. The “corridor” deductible
amounts were never more than $200 and, m ost
frequently, $100. On the other hand, the “inte
grated” deductibles were higher, i.e., $300 and
$500, but subject to reduction by the value o f the
basic benefits.
The period during which expenses to satisfy the
deductible m ight be accum ulated ranged from 3
m onths to 2 years—usually 12 months or 1 calen
d ar year. However, to reduce the effect o f using
an arbitrarily selected 12-month period—a calen
der year—m ost o f chese plans credited tow ard the
deductible those unreim bursed expenses incurred
in the last 3 months o f the preceding calendar year,
even though they m ay have been used to satisfy
th at year’s deductible. In the plans with a cal
endar-year accumulation period, the deductible,
usually $100, w as applicable to all disabilities.
Furtherm ore, over h alf o f the plans (14) with
other accumulation periods applied the deductible
to a ll disabilities occurring within a specified
period. In the rem aining 10 plans, it w as applied
to each disability.
Once the deductible am ount w as satisfied, em
ployees and dependents were reim bursed fo r 80
percent o f excess costs in 23 plans and 75 percent
in 17 plans. However, two comprehensive m ajor
m edical plans p aid a higher percentage o f some
o f the charges in excess o f the deductible. The
Am erican A irlines plan absorbed the entire cost
o f hospital services; up to $500 and 80 percent o f
the rem ainder; The General E lectric Co. plan p aid
the fu ll cost o f hospital and surgical charges up
to $225 and 85 percent o f the rem ainder. Coin
surance percentage!? usually applied to all expenses
regardless o f type o f illness. U nder 10 plans, how
ever, out-of-hospital psychiatric expenses were co
insured fo r only 50 percent and not covered at all
under 4 plans.
The benefit period—the period during which
m ajor m edical benefits were payable without
r
another deductible having to be satisfied—ranged
from 12 months to 36 months, but was usually 12
months or a calendar year. D uring this period,
which in most plans began as soon as expenses ex
ceeded the deductible, expenses fo r all disabili
ties were usually covered, regardless o f their num
ber. However, in plans with long benefit periods,
(24 months or longer), the benefit period usually
applied to each disability rather than to all
disabilities.
A ll plans placed a lim it on the amount o f m ajor
m edical benefits that would be paid. Three out o f
five plans provided lifetim e lim its—most fre
quently $10,000—as well as per disability or per
benefit period lim its. In these plans the per dis
ability and per benefit period maximums were,
with one exception, one-half the lifetim e m axi
mums. Commonly, under plans with lifetim e
maximums, after a specified amount o f expenses
had been paid by the plans (e.g., $1,000), the origi
nal lim it w as reinstated, if the insured provided
satisfactory evidence o f insurability.
M aternity Benefits.™ W ith few exceptions, sal
aried women employees and the wives o f male
employees were provided benefits fo r m aternity as
well as nonm atem ity disabilities. These benefits
were, usually available i f pregnancy commenced
while insured, but often there was a 9-month w ait
ing period.
G enerally, the weekly accident and sickness
benefits and the hospital and surgical benefits pro
vided fo r m aternity disabilities were sim ilar to
those available fo r nonm aternity cases. Som e
plans, however, substituted a general lump-sum
allowance fo r the individual health benefits.
P artial compensation o f income losses due to
pregnancy was paid by 21 o f the 27 plans with a
nonoccupational accident and sickness benefit.
W ith two exceptions, the weekly amount was the
same as the amount p aid during absences caused by
nonmatem ity nonoccupational disabilities. U nder
the graduated-by-eam ings plans, the m aternity,
accident and sickness benefit fo r a $5,000-a-year
woman employee ranged from $40 to $63, but w as
most frequently $60. These weekly amounts were,
with few exceptions, p aid fo r 6 weeks—a much
shorter period than the 13 or 26 weeks usually
specified fo r nonm atem ity benefits.
H ospital benefits fo r expenses incurred during
m aternity, as well as nonm atem ity confinements,
were provided women employees and dependent
wives by 39 and 38 plans, respectively. U sually,
however, restrictions were placed on the bene
fits fo r m aternity confinements. Some plans
shortened the period during which the hospital
benefits were payable; in other plans, a different
type o f benefit w as offered fo r m aternity than
fo r nonm atem ity confinements. P lan s changing
the type o f benefit either provided cash allowances
instead o f service benefits fo r each type o f hospi
tal service, or a flat amount fo r a ll hospital ex
penses in lieu o f separate cash allowances or serv
ice benefits.
A cash hospital benefit was granted fo r m ater
nity confinements by all except the 12 plans that
provided service benefits. M ost cash plans pro
vided a single allowance fo r all hospital charges,
so that the shorter the patient’s confinement, the
larger the allowance available fo r ancillary
services. However, about 1 out o f 3 plans p aid
separate allowances fo r room and board and fo r
ancillary services.
The maximum duration o f benefits w as, with
one exception, fo r 10 days or longer, which would
ordinarily be am ple fo r a norm al delivery.****
The 12 plans providing service benefits paid the
fu ll cost o f sem iprivate room accommodations.
In contrast, 5 o f the 8 cash benefit plans specified
room and board allowances ranging from $9 to $14.
Certain ancillary hospital services were p aid
fo r in fu ll by the service benefit plans. The few
plans providing a cash allowance fo r ancillary
services paid the fu ll cost o f all services up to a
maximum amount which, with one exception,
ranged from $50 to $100.
The flat allowance fo r hospital room, board, and
extra services paid by 2 out o f 3 o f the cash bene
fit plans ranged from $50 to $150—usually $80.
A surgical benefit was included in m ost o f the
plans covering m aternity disabilities to defray, at
least in p art, the physician’s charge fo r prenatal,
norm al delivery, and postnatal care. Cash benefits
« The benefits described in this section are for normal delivery
maternity disabilities. Usually, different hospital and surgical
benefits were available for other types of maternity disabilities.
*T h e average stay in the hospital for a maternity case, in
1958-60, was 5 days. See Health Statistics From the XJ.S. Na
tional Health Survey: H ospital Discharges and Length of S ta y ;
Short-Stay H ospitals, United States, 1958-60 (Washington, U.S.
Public Health Service, 1962), Publication 584-B32, table 18,
p. 31.
8
were paid women employees by 24 plans and de
pendent wives by 22 plans. Twelve plans pro
vided service benefits to both groups if the fam ily
income was below a certain amount, usually
$4,000.*® A n employee and a dependent w ife
whose fam ily income was in excess o f the specified
lim it were granted a cash allowance. Allowances
o f $75 and $90 were most frequent in both the cash
and service-with-income-limit plans, although they
ranged from $50 to $105.
The general lump-sum allowances paid by 10
plans, in lieu o f specific hospital and surgical bene
fits, ranged from $100 to $300. I t w as m ost fre
quently $150 (fo u rp lan s).
Benefits for Retirees and Dependents37
L ife Insurance. Substan tially reduced life insur
ance coverage fo r retired employees w as included
in alm ost all o f the 38 plans which extended cov
erage.*28 W ith few exceptions, the amount o f cov
erage was reduced either imm ediately upon retire
ment to a constant level (14 plans) or periodically,
beginning imm ediately upon retirement or shortly
thereafter, until a minimum level was reached (20
p lan s). In most cases, the amount o f coverage
ultim ately provided by the plans m aking periodic
reductions was greater than that extended by plans
m aking immediate fu ll reductions.
Reductions were m ade by several different
methods. F o r exam ple, 8 o f the 13 plans covering
retirees th at m ade supplem entary insurance avail
able to active employees effected an immediate
reduction by sim ply discontinuing supplem entary
coverage. In 15 plans, the ultim ate amount o f
the retiree’s life insurance coverage varied ac
cording to his years o f active service. E ig h t o f
the 20 plans th at periodically reduced the retired
employee’s coverage, fo r exam ple, term inated the
reduction at a percentage determined by his length
o f service. The General E lectric Co. plan, fo r
exam ple, stopped m aking reductions after 27
months fo r the employees with 10 years’ service
or more so th at coverage would not be reduced
* Service benefits, as a rale, only covered tbe delivery of the
child; doctors were free to charge patients for prenatal and post
natal care.
87 See footnote 5. Excluded from this discussion is the acci
dental death and dismemberment benefit extended by one plan.
28 The one plan with life insurance coverage for dependents of
active employees did not extend this benefit to dependents of
retirees.
* Excluded from the ranges of benefit amounts and the averages
were the noncomputable coverages provided by three plans.
below 33% percent o f their preretirem ent cover
age. Reductions were halted after 34 months fo r
those with 5 years’ service so that coverage would
not be reduced below 16% percent, and afte r in
term ediate periods), fo r retirees with 6 but less
than 10 years’ service.
The net effect o f a ll these reductions w as to
provide $5,000-a-year-workers retiring at age
65 with 20 years o f service with life insurance
coverage that ranged, at age 65, from $500 to $13,500.** Although the average benefit ($5,100) w as
the sam e as the salary level a t the tim e o f retire
ment, by age 70 subsequent reductions cut the
average benefit to $3,000.
The amounts actually payable a t death by three
plans would, in m ost instances, be further reduced
because these plans deducted from their life in
surance coverage the amounts they paid fo r m ajor
m edical benefits incurred after retirement.
H ospital Benefits. Only h alf the plans extended
hospital benefits to retired employees as com pared
with nearly 4 out o f 5 that extended life insurance.
However, five plans that did not extend hospital
benefits to retirees covered such expenses through
their m ajor m edical benefits plans. U nlike life
insurance, which was alm ost invariably reduced,
about h alf o f the 24 plans extending hospital bene
fits provided retired employees and their depend
ents with the same benefits as they had p rio r to
retirement.
Service benefits were extended to retired em
ployees and their dependents by 14 plans, all o f
which also had this type o f coverage fo r active
employees and their dependents. E ig h t o f the
rem aining 10 plans specified cash benefits. W ith
one exception, these plans also provided cash bene
fits prior to retirement.
Benefits were payable fo r full-benefit periods
ranging from 21 to 730 days, but m ost frequently
120 days. D uring these periods, the fu ll cost o f
sem iprivate room a ccommodations w as allowed by
16 plans, and cash room and board allowances by
the rem aining 8 plans. Instead o f specifying the
number o f benefit days, the Borden Co. plan,
which paid the fu ll cost o f sem iprivate rooms,
placed a dollar lim it ($1,050) on the total amount
that it would pay fo r such accommodations.
The cost o f specified hospital ancillary services
w as paid fo r in fu ll during the entire period o f
9
hospital confinement by 8 of the 14 service benefit
plans, and during the full benefit period by 5 of
the remaining 6 plans. The 10 plans extending
cash benefits most frequently paid the full cost
up to a specified amount without additional re
imbursement on a percentage basis.
Surgical Benefits. Half of the plans with surgi
cal benefits for active employees and dependents
extended this coverage to retirees and their de
pendents. In seven plans where surgical bene
fits were not extended, such expenses were covered
by the major medical benefits plan. While usu
ally the same benefits were provided, 5 of the 22
plans offering benefits reduced the allowances for
some or all procedures.
The annual income limits under the six plans
extending the service-with-income-limits benefits
were the same as prior to retirement. For indi
vidual and family coverage, the income limits un
der two plans were $2,500 and $4,000; under two
other plans, $4,000 and $6,000; and $7,200 and
$7,500 for both coverages under two other plans.
The maximum schedule allowances provided under
the cash and service-with-income-limits plans for
retirees and their dependents, ranged from $200
to $500, with over half of the plans having either
a $250 or a $300 maximum allowance. The appen
dectomy allowances varied from $100 to $175 with
the majority specifying $125.
Basic Medical Benefits. Over half the plans (18)
with basic medical benefits for active workers and
their dependents extended them to retired em
ployees and their dependents. Nine plans that
did not extend basic medical benefits covered these
expenses with major medical benefits. Medical
benefits, like surgical benefits, were usually ex
tended without change; however, all plans
providing allowances for home and office visits
discontinued them.
Five of the 10 plans with service-with-incomelimits benefits for active employees continued
these benefits after retirement. Under these
plans, retired employees and their spouses with an
nual incomes falling within the limits specified by
the plans had their physicians5 visits covered in
full up to a stated number per disability.
The 18 plans were almost evenly divided among
those providing $3, $4, and $5 for each in-hospital
visit. Although the maximum amount of basic
medical benefits payable by these plans ranged up
to $2,190, only seven plans allowed over $500 for
each disability.
Major Medical Benefits. Retired employees and
their dependents were provided major medical
benefits by 20 plans—one-half those granting them
to active employees and their dependents. One
plan with only basic benefits for active workers
and their dependents substituted a major medical
plan for retired workers and their dependents.
However, with seven exceptions, major medical
benefits supplemented basic health benefits.
Plans with major medical benefits for both ac
tive and retired employees and their dependents
provided, with only one exception, less liberal
benefits after retirement. Generally, the reduc
tions were effected by providing higher deductibles
(the initial amounts which the retirees paid before
being partially reimbursed by the plan) and
lower maximum benefits. The three plans that re
duced the amount of life insurance coverage by
the amount of major medical benefits paid after
retirement limited the total amount payable to a
specified percentage of the retiree’s life insurance.
The deductibles ranged from $25 to $500—most
frequently $100. Seven plans had larger deduct
ibles—at least twice as great—for the retired
group than for the active group.
Once the deductible was satisfied, retirees were
reimbursed for 75 or 80 percent (7 and 12 plans,
respectively) of health care charges incurred dur
ing benefit periods ranging from a calendar year
or 12 months to 24 months. Limits were placed
on the total amount of these reimbursements, as
they were for active workers. However, while 5
out of 8 plans had a lifetime limit for the active
group, all of the plans had such a limit for the
retired group. Most often this limit was $5,000;
only 1 out of 4 had a lifetime limit of $10,000 or
more.
P en sio n P la n s
op L abor S tatistics ’ first digest of
50 large pension plans covering salaried em
ployees 1permits some rough comparisons between
benefits provided salaried workers and production
workers covered in an earlier study of 100 pension
plans under collective bargaining.2 On the basis
of this limited coverage, it would appear that, as
against production worker plans, salaried em
ployee plans tend to provide a greater range of
benefits (early retirement, vesting, death bene
fits) and higher benefit levels for the same earnings
and service levels. Salaried employee plans more
frequently provide for employee contributions,
which may account—in part at least—for the
above advantages. They also tend to stipulate
more restrictive participation requirements and
more frequently provide for involuntary retire
ment.
The principal features of the 50 selected pension
plans for salaried workers are described in this
article. Coverage ranged from about 1,000 to
several hundred thousand workers in a wide
variety of industries.3
Most companies had a separate plan for salaried
employees, but in a few cases (e.g., the United
States Steel Corp.), the plan also covered produc
tion workers. However, nine companies had
two salaried worker plans—a basic noncontribu
tory plan for all salaried employees, and a supple
mental contributory plan for those salaried
employees who met certain criteria. An em
ployee of the Union Carbide Corp., for example,
is covered by the noncontributory plan when first
employed; after 1 year’s service he is eligible to
join the contributory plan if his annual salary
exceeds $3,000.
Thirty-one plans provided, in addition to
normal retirement, all three of the major com
ponents of modem pension programs—early re
tirement, disability retirement, and vesting.
Fourteen of these plans paid a death benefit if the
worker died while still employed or after his
retirement, and 10 paid larger than usual benefits
to employees wbo retire early at the company’s
request or by mutual consent.
Participation in a salaried worker pension plan
is not necessarily automatic for the newly hired
salaried worker. The employee frequently is
required to complete a specified period of employ
ment, to reach a certain age, to attain a minimum
salary, or to meet combinations of these standards
in order to participate in the plan. Over half
of the plans for salaried workers contained such
requirements. Basic plan requirements ranged
from 25 to 35 years of age, from 6 months to 5
years of service, from $4,200 to $4,800 of annual
salary.
Some plans, by requiring the completion of a
certain length of credited service to qualify for
a pension, effectively deprived newly hired older
workers of an opportunity to qualify. This was
done either by not crediting service after a speci
fied age or by automatically retiring all employees
at a specified age regardless of their right to a
pension. The Douglas Aircraft Co. plan, for
example, requires 10 years of service to qualify for
a pension, but does not credit service after age 65.
As a result, workers hired after age 55 cannot
qualify for pension benefits.
T he B ureau
Normal Retirement
Age 65 was the normal retirement age for both
sexes in all but a few salaried employee plans, as
it is in nearly all production worker plans. Two
plans that specified age 60 granted credit for
service after that age. Service as well as age
requirements had to be met in 39 plans. Although
the length of service ranged from 1 to 30 years,
5 years or less were required in 21 plans. Thirtytwo plans specified a compulsory retirement age
at which the employer may compel the worker
to retire. About a third of these plans also pro
vided for an automatic retirement age beyond
which no employees may continue working. Age
65 was the most frequent compulsory age; the
automatic retirement age ranged from 65 to 70.
The plans typically based normal retirement
benefits on both earnings and service. Benefits
varied by length of service alone in only three
plans. One program, North American Aviation’s
combined elements, of both types, providing for
i For a more comprehensive account of the study, see D igest o f 60 Selected
Pension P la n s fo r Salaried Em ployees, S pring 196S (B L S Bulletin 1373,1063).
The programs studied covered professional, technical, administrative, cleri
cal, and sales workers and, lit many cases, executive employees.
s D igest of O ne-H undred Selected Pension P la n s under Collective B argaining ,
S pring 1961 (B L S Bulletin lo07,1962).
s The companies are identiled in B L S Bulletin 1373.
10
11
each year of service a monthly benefit of $2.50
plus 1.5 percent of the amount by which average
monthly salary exceeds $350.
Many plans guaranteed to workers who met
minimum requirements a minimum pension deter
mined by a formula different from that used to
determine basic normal retirement benefits. Gen
erally, the minimum formula provided an enhanced
benefit to eligible workers with low earnings, but
in some instances it applied only to those with
either low earnings or short service, or both.
Private plan benefits were integrated with social
security benefits by either the offset method or the
two-percentage factors method. An offset pro
vision, under which all or part of the primary
social security benefit is deducted from the amount
initially determined by the benefit formula, was
found in nine plans. Most of the plans used two
percentages: One applicable to the portion of
earnings subject to social security taxes when the
formula was designed or revised, and a larger
percentage applicable to the portion in excess of
that amount. The earnings to which the per
centages apply were usually stated by the plan
in dollars and cents. For example, Hart, Schaffner and Marx Co. provided a monthly benefit of
0.75 percent of the first $350 of monthly earnings
and 1.75 percent for the remainder of monthly
earnings for each year of service. Some plans,
however, specify the earnings in terms of amounts
subject to the social security tax 4 so that their
benefit formulas are automatically adjusted to
changes in the tax. For example, the benefit
formula of American Airlines, Inc., provided a
monthly benefit of 1.25 percent of monthly earn
ings subject to the social security tax and 2 percent
of the portion of earnings in excess of such amount
for each year of service.
Only one variable annuity plan—that of the
Time, Inc.—was studied. It consisted of two
parts—a fixed benefit determined by the benefit
formula, and a variable benefit reflecting the in
vestment experience of the fund.
To permit a comparison of benefit amounts,
normal retirement benefits provided by the plans
were computed by the BLS on the assumption
that the worker retires at age 65 after 20 or 30
years of service,5 with average annual earnings of
$4,800, $10,000, or $15,000. These earnings
were assumed to be constant throughout the
worker’s career, thus eliminating the difference
(important in 18 plans) between benefits based on
terminal earnings (earnings of the last or highest
5 or 10 years) and career average earnings.6
Under these assumptions, half of the plans paid
a monthly benefit of $80 or more to workers with
average annual earnings of $4,800 and 20 years of
credited service. When added to the worker’s
maximum primary social security benefit ($127),
the median plan thus provided a total retirement
income of more than half of his pay immediately
prior to retirement. For the hypothetical salaried
worker at the same earnings level but with 30
years of service, the median plan provided a
benefit of $120 per month exclusive of social
security.
Benefits paid by the plans to $10,000- and
$15,000-a-year employees were, as a rule, more
than twice and three times, respectively, those
paid the $4,800-a-year worker. For example,
salaried workers with annual earnings of $10,000
and 20 or 30 years of service would receive from
the median plan a monthly benefit of $190 or $289,
respectively—about 2.4 times the amounts payable
by the median plan to $4,800-a-year workers with
the same length of service. The more-thanproportionate benefits for higher paid employees
stemmed from the integration of private plan
benefits with social security benefits. However,
since plan benefits usually were not fully inte
grated with public benefits—the difference
between the two percentages did not compensate
fully for social security benefits—the combined
public and private pensions payable to $10,000- and
$15,000-a-year employees were less than two and
three times, respectively, those payable to the
$4,800-a-year employee. Thus, the combined
monthly benefits payable to a $10,000-a-year
employee with 30 years of service in the median
plan would be $416—about half his preretirement
earnings—as compared with $247 payable to the
$4,800-a-year employee with the same service. The
pensions payable to the $15,000-a-year men were
generally 50 percent greater than those for em
ployees earning $10,000 a year.*•
< See sec. 3121(a)(1) of the Federal Insurance Contributions Act.
* The computations were based on the formulas for current service. How
ever, the amounts currently payable to eligible workers are often less because
they are based, at least in part, on past service benefit formulas. See B L S
Bulletin 1284, p. 5.
• This assumption would not affect the medians noted below unless termi
nal earnings averaged more than 25 percent higher than career earnings for
many of the 18 plans.
12
Early Retirement
Early retirement provisions in 49 plans permit
a worker to retire prior to the normal retirement
age and receive an immediate, but almost invaria
bly reduced, benefit. Although the minimum age
for early retirement ranged widely, 31 plans
required the worker to be age 55, and 11 specified
age 60. In addition, the worker usually had to
complete 10 or more years of service.
The normal benefit formula was used in the
computation of the benefit amount in all of the
early retirement plans. The amount of the re
duction for each month the worker was below
the normal retirement age (0.5 percent and 0.33
percent were most common) was either specified
in the plan or was based on actuarial tables. For
example, the Pacific Gas and Electric Co. provided
a worker with average annual earnings of $4,800
and 20 years of service a benefit of $140 a month
at age 65. If the worker retired earlier his benefit
was reduced 0.33 percent for each month under
age 65. Thus, a worker retiring under this plan
at age 60 with 20 years of service and the salary
of $4,800 a year, would receive a monthly benefit
of $112.28 for life.
A few plans provided a supplemental early re
tirement benefit that was paid only up to the
time when the worker reached age 65 or became
eligible for an unreduced primary social security
benefit. The Goodyear Tire and Rubber Co.’s
early retirement benefit formula, for example,
provided the normal benefit reduced by 0.4 per
cent for each month under age 65, plus—until
the time of eligibility for primary social security
benefit—0.5 percent of average annual earnings
subject to the social security tax for each year
of service. Early retirement benefits were pay
able immediately in all plans; a significant num
ber of plans, however, allow the worker to delay
receiving payments until the normal retirement
age at which time he would receive the entire
normal benefit, with service credited as of the
time of actual retirement.
A level income option, often called a social
security adjustment option, was found in half
of the plans. This option provides a larger
benefit than that due under the regular formula
until the worker gets his social security benefits,
and a lower benefit thereafter so that his monthly
income is level throughout retirement.
In addition to the regular early retirement
benefit, a special early retirement benefit was
provided by 10 programs. These provisions,
also found in plans for production workers, apply
to employees compelled by the company to
retire early or retiring under “mutually satis
factory conditions/’ They provide benefits sub
stantially higher than those under the regular
early provisions. The Swift and Co.’s plan, for
example, provided the actuarial equivalent of the
normal benefit to workers retiring at their own
request; if the worker was retired by the company,
however, the full normal benefit for his attained
service was paid.
Disability Retirement
Disability retirement provisions, found in 38
plans, are designed to permit totally and perma
nently disabled workers to retire early and re
ceive an immediate benefit. Most plans did not
have an age requirement for disability retirement.
However, service requirements—usually 10 or
15 years—were found in all but one of the plans.
Although there were many variations in the
formulas used to determine disability retirement
benefits, 16 of the 38 plans provided the normal
benefit amount and 12 provided a reduced normal
benefit. Moreover, nine plans recomputed the
disability benefit on the basis of the normal
benefit when the disability pensioner reached age
65 or became eligible for social security benefits.
Some plans, recognizing that not all workers
qualifying for private plan disability benefits
also qualify for social security disability benefits,
provided a supplemental disability benefit pay
able until the worker is eligible for social security
benefits or attains age 65. For example, Gen
eral Motors Corp.’s disability retirement formula
provided the normal benefit plus an additional
benefit of $2.80 for each year of service until the
worker is eligible for unreduced social security
benefits or reaches age 65. In addition, some
plans provided a minimum monthly disability
retirement benefit. In general, the disability
benefit formulas were more liberal than those
under early retirement provisions.
Vesting
The predominant type of vesting found in the
37 basic plans with vesting provisions was de
ferred full vesting (30 plans). Under this pro
vision, a qualified terminated employee has the
right to receive, at normal retirement age, all
13
accrued benefits. A deferred graded vesting
provision, found in six programs, gives a quali
fied worker the right to receive at normal retire
ment age a specified percentage of his accrued
benefits, depending on the worker's age and
service. The plan of International Business
Machines Corp., for example, requires the worker
to have 15 years of service to be 50 percent vested;
an additional 10 percent is vested for each year
of service thereafter, until full vesting is attained
after 20 years of service.
The requirements for vesting varied greatly
among the plans. Age requirements, ranging
from age 40 to age 60, were found in 17 plans.
Most plans required 10, 15, or occasionally, even
more years of service. Only two plans had no
service requirements; one required the attainment
of age 55, the other granted immediate full vesting.
Most of the plans vested all qualified workers
regardless of the reason for the termination of their
employment. However, some plans limited vest
ing to those terminated under stipulated circum
stances such as layoff, permanent shutdown, or
furlough.
Benefits for Survivors
Death benefit provisions providing for payment
to a worker's beneficiary in the event of his death
were found in 15 plans. A death benefit was pay
able in the event of the worker's death either before
or after retirement in six plans, only after retire
ment in another six, and only before retirement in
three.
Death benefits took several forms. Some plans
guaranteed the payment of monthly retirement
benefits for a minimum period of time; if the
worker dies during that time, the benefits are
continued to his beneficiary until the end of the
period. Other programs continued the retirement
benefit for a specified period—usually 12 months—
after the pensioner's death, and a few plans pro
vided a lump-sum death benefit.7
Joint and survivor options were made available
by nearly all of the plans. Under this type of
provision, the worker receives a reduced benefit
7 Most workers covered by a pension plan are also covered by a group life
insurance policy under a separate health and insurance program. Under an
increasing number of health and insurance plans, retired workers retain all
or part of their life insurance coverage that would supplement any death
benefits provided by the pension plans. For the health and insurance plans
applicable to salary workers of the same companies, see D igest of 69
Selected H ealth and Insurance P la n s fo r Salaried
(B LS B u lletin 1377).
Em ployees, F a ll 196ft
in exchange for the guarantee that if he dies while
his beneficiary is living, payments at a predeter
mined rate will continue to his beneficiary for life.
The benefit to be continued may be the same, one
half, or—in some cases—any of several specified
percentages of the retired worker's pension. Under
13 plans, the worker could choose a period-certain
option instead of a joint and survivor option.
Under this option, his retirement benefit is also
reduced for life but usually by a smaller amount.
If he dies before receiving a specified number of
payments, the balance is continued to his bene
ficiary.
Financial Aspects
In most plans, (34) contributions were made to
a trust fund that provided plan benefits either
directly from fund assets or by purchasing an
annuity for each worker at retirement. Although
these trust funds were generally administered by
a corporate trustee (bank or trust company), a
few trust funds were administered by a board of
trustees or a single trustee appointed by the
company.
Six of the plans were underwritten by an insur
ance company. Various combinations of both
funding media described above were used to
provide benefits by eight plans. Benefits were
paid out of the company's general assets by one
plan (a pay-as-you-go plan); under another plan
normal and early retirement benefits were provided
by a trust fund, while disability retirement benefits
and death benefits were on a pay-as-you-go basis.
Fourteen plans required employee contributions
and, as noted earlier, nine others made additional
benefits available on a contributory basis. The
worker contributed a specified percentage of his
earnings under all of the contributory plans, with
the employer paying the balance of the cost of the
program. Under 12 of the 14 plans, the worker
contributed a smaller percentage (between 0 and 3
percent) of earnings subject to social security
taxes, and a larger percentage (between 3 and 6
percent) of earnings exceeding that amount.
The amount of the worker's annual contribution
varied widely. Where payable it ranged from $72
to $192 for a worker with annual earnings of
$4,800, from $156 to $456 for the $10,000-a-year
employee, and from $306 to $756 for one earning
$15,000 a year.
U.S. GO VERNMENT P RIN TIN G OFFICE . 1964 0 - 7 3 2 - 3 7 6
Recent BLS Publications on Employee Benefit Plans
B ulletin
num ber
HEALTH AND IN SURA NCE
Price
1250
H ealth and Insurance Plans Under C o lle c tiv e B argain in g: A ccid e n t and
Sickness B en efits, F all 1958.
25 cents
1274
H ealth and Insurance Plans Under C o lle c tiv e B argain in g: H ospital B en efits,
Early 1959.
30 cents
1280
H ealth and Insurance Plans Under C o lle c tiv e B argain in g: S u rg ic a l and
M e d ic a l B en efits, Late Su m m er 1959.
30 cents
1293
H ealth and Insurance Plans Under C o lle c tiv e B argain in g:
Benefits, F all 1960.
20 cents
1296
H ealth and Insurance Plans Under C o lle c tiv e B argain in g: L ife Insurance and
A c c id e n ta l D eath and D ism em b erm en t Benefits, Early Su m m er 1960.
25 cents
1330
D igest o f One Hundred S e le c te d H ealth and Insurance Plans Under C o lle c tiv e
B argain in g, W inter 1 9 6 1 -6 2 .
$ 1 .2 5
1377
D igest o f 50 S e le c te d H ealth and Insurance Plans for S a la r ie d E m ployees,
Spring 1963
$1
R e ce n t C hanges in N e g o tiate d H ealth and Insurance Plans.
R e v ie w , S ep tem b er 1962. (R eprint 2402. )
Free
M ajor M e d ica l
M onthly Labor
PENSIONS
N orm al R e tirem e n t, Early and
4 0 cents
1284
Pension Plans Under C o lle c tiv e B argain in g:
D isa b ility R e tirem e n t, F all 1959.
1307
D igest o f O ne-H undred S e le c te d Pension Plans Under C o lle c tiv e B a rg ain in g ,
Spring 1961.
50 cents
1326
M u ltiem p lo yer Pension Plans Under C o lle c tiv e B argain in g, Spring 1960.
65 cents
1334
Pension Plans Under C o lle c tiv e B argain in g:
W inter 1 9 6 1 -6 2 .
25 cents
1373
D igest o f 50 S e le c te d Pension Plans for S a la r ie d E m ploy ees, Spring 1963.
35 cents
R e ce n t C hanges in N e go tiate d Pension Plans.
M ay 1962. (R ep rin t 2392. )
Free
Benefit for Survivors,
M onthly Labor R e v ie w ,
P relim in ary R e le a se : P revalen ce o f M u ltiem p lo yer Pension Plans Under
C o lle c tiv e B argain in g, Spring 1960. (February 1961. )
Free
P relim in ary R e le a se : P revalen ce and C h aracteristics o f Unfunded Pension
Plans. (January 1963. )
Free
OTHER
1325
D igest o f P rofit-Sh arin g, S avin gs, and Stock Purchase Plans, Winter 1 9 6 1 -6 2 .
30 cents
1365
D igest o f N ine S u p p lem en tal U nem ploym en t Benefit Plans, Early 1963.
25 cents
H ealth , Insurance, and Pension Plan C overage in Union C ontracts,
L ate 1960. BLS R eport 228.
Free
@FedFRASER