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Pension Plans Under
Collective Bargaining




Bulletin No. 1147
UNITED STATES DEPARTMENT OF LABOR
James P. Mitchell, Secretary
BUREAU OF LABOR STATISTICS
Ewan Clague, Com m issioner




Pension Plans Under
Collective Bargaining
Vested Rights
Compulsory Retirement
Types and Amounts of Benefits

Bulletin No. 1147
UNITED STATES DEPARTMENT OF LABOR
James P. Mitchell, Secretary
BUREAU OF LABOR STATISTICS
Ewan Clague, Com m issioner
For sale by the Superintendent of D ocum ents, U . S . GoYernment Printing Office, W ashington 25, D . C. - Price 20 cents







From the March, May, and July 1953
issues of the Monthly Labor Review

Letter of Transmittal
U n it e d S t a t e s D e p a r t m e n t o f L a b o r ,
B u r e a u of L a b o r St a t is t ic s ,

W ashington, D . C., October 12, 1958.

The S
L
:
I have the honor to transmit herewith a study of various aspects of pension
plans under collective bargaining in effect in the fall of 1952. The study deals
with vested rights, compulsory retirement, types and amounts of benefits, and
problems related to these aspects of pension plans.
This study was prepared in the Bureau’s Division of Wages and Industrial
Relations by Evan K. Rowe and Thomas H. Paine with the assistance of
Harry E. Davis.
E
C
, Commissioner.
Hon. James P. Mitchell,
e c r e t a r y of




abor

w an

lague

Secretary of Labor.

(m)




Preface
During the past 10 years, one of the most important developments in the
field of industrial relations has been the increase in the number and coverage
of pension, health, and insurance plans established by collective bargaining
or brought within the scope of labor-management agreements. Although
many employers had sponsored and financed such programs, few union agree­
ments prior to 1940 made provision for such plans. By mid-1950 upwards
of 5 million workers were covered by retirement programs within the scope
of collective-bargaining agreements and practically every major union had,
to some extent, negotiated such plans.
Interest in pension plans was stimulated during the war and immediate
postwar periods by a number of factors. Among these were the Government’s
wage stabilization and taxation policies which made such programs feasible
and less expensive to employers. Wage stabilization regulations limited the
amount of wage increases which employers could grant, but, at the same time,
permitted the adoption of reasonable employee insurance and pension benefits.
Under Federal tax regulations employers were permitted to deduct, within
specified limits, contributions to pension plans when computing their tax
returns. Another factor which gave impetus to the establishment of private
retirement plans was the decreasing value (in light of rising living costs) of
the retirement and survivors’ benefits paid under the Federal Social Security
program. Benefits under this program remained unchanged from 1940 until
late 1950. Concurrently, the obligation of employers to bargain on pensions,
under the Labor Management Kelations Act of 1947 was being contested.
Early in 1949 this obligation was affirmed by the United States Supreme
Court. Later that year the spread of pension plans was greatly accelerated
by the report of the Steel Industry Fact-Finding Board which held that
industry had both a social and economic obligation to provide workers with
social insurance and pensions. The subsequent pension settlements in the
steel and automobile industries further stimulated this movement. The
number of workers covered by pension plans has continued to grow at a fairly
rapid rate since early 1950.
With pension plans financed in whole or in part by employers firmly estab­
lished as an integral part of the system of employee remuneration, consider­
able attention has been paid recently to the amount of benefits provided
under the plans, their relationship to the Federal Social Security program,
and their impact on the economy of the country. The immediate concern of
many trade unions, particularly, has been to seek an upward revision in the
amount of benefits to take account of rising living costs and to adjust those
plans which are directly coordinated with or “off-set” against Social Security
payments so as to pass on to the retired worker all or a part of the increased
benefits made available under the Federal program. Many such benefit
increases have occurred since 1950.




(▼ )

While not publicized to the same extent as benefit amounts, other provi­
sions of pension plans have also received the attention of labor, management,
and the general public. A major concern involves the loss or protection of
the individual’s credited service under a plan if he should change jobs.
Another is the matter of compulsory retirement, i. e., whether a worker
should be compelled to retire solely on the basis of age. These problems are
of vital concern not only to the employer, the worker, and the union, but
also to the economy as a whole. Considerable discussion has centered about
the extent to which the acquisition of rights toward benefits in one company
might effectively deter workers from moving to another firm if their built-up
pension credits with them cannot be transferred. Thus, a practice which
may provide a low turnover rate, continuity of work, and better plant morale
for the individual employer, may be the decisive factor in retaining the
worker. The application of a mandatory retirement age may serve to re­
move from the labor force workers still capable of productive work. These
problems take on special significance during a period when the effective
utilization of manpower is of national importance.
In meeting its responsibility in the field of industrial relations, the Bureau
of Labor Statistics has, since 1945, conducted a number of studies dealing
with pensions and other employee-benefit plans. These studies have in­
cluded : periodic reports on the overall growth of employee-benefit plans under
agreement, including data on methods of financing and types of benefits
provided; reports providing details on the types and amounts of benefits for
selected industries; summary digest^ of selected programs; the changes in
programs of major companies; and analyses of provisions pertaining to em­
ployee-benefit plans in the Bureau’s comprehensive file of collective-bargaining
agreements. The Bureau maintains a file of current employee-benefit plans
which is available for public use in the same way as the Bureau’s file of cur­
rent collective-bargaining agreements.
The Bureau has made the following series of studies which analyze in de­
tail selected provisions of a representative sample of pension plans under
collective-bargaining agreements. It is intended to meet the general interest
in the substantive aspects of pension plans and to provide specific data to
those directly concerned.




(vi)

Contents
Pax*
P art I — Vested rights__________________________________________________________________________________
Analysis of plans_______________________________________ ___________________________________________
Characteristics of vesting provisions_____________________________________________________________
Requirements for vesting_______________________________________________________________________
Attitudes toward vesting______________________________ ____________________ ________________________
Pension plans and labor m obility— ____ _______________ _________________________ ____________________
Vesting r i g h t s . ____ __________________ ___________________________ ________ ______________ _____
M ultiem ployer plans__________________
E a rly retirement benefits______________________________ ________________________ ________________
Other benefits_____________________
Tables:
1. Distribu tion of plans in survey, by workers covered and by type of employer u nit_________________
2. Vested and nonvested plans and workers covered, by type of vesting and method of financing______
3. Plans and workers covered by deferred full vesting, by requirements for vesting___________________
Chart:
Vesting rights of workers under pension plans, after meeting service requirements, 1952____________ _
Part I I — Com pulsory retirement________________________________________________________________________
Analysis of plans________________________________________________________
Prevalence of compulsory retirement____________________________________________________________
Com pulsory retirement characteristics___________________________________________________________
Retirement practices and labor utilization____________________________________________________________
Attitudes toward compulsory retirement_____________________________________________________________
T a b le s:
1. Plans and workers covered by compulsory and automatic retirement provisions, b y type of em­
ployer unit— ________________
2. Plans and workers covered by provisions for compulsory retirement, b y type of adm inistration_____
3. Plans and workers covered by compulsory retirement provisions, b y compulsory age specified and
provision for autom atic retirement at the same or later age___________________________________
4. D istribution of plans b y specified normal, compulsory, and automatic retirement ages and by am ount
of service credited after normal retirement age_______________________________________________
Chart:
Com pulsory retirement provisions in pension plans, 1952__________________________________________
Part
— T ypes and am ounts of benefits-----------------Participation_______________________ - ________________________________________ ____________________
M in im u m age and service requirements__________________________________________________________
M ax im u m age requirements____________________________________________________________________
Requirements for benefits__________________________________________________________________________
N o rm al retirement_________________ '___________________________________________________________
E a rly retirement______________________________________________________________________________
D isab ility retirement__________________________________________________________________________
N o rm al retirement benefits_________________________________________________________________________
Basic benefit form ula__________________________________________________________
M in im u m benefits_____________________________________________________________________________
Adjustm ent to Social Security benefits--------------------------------------------------------------------------------------------Am ounts of benefits___________________________________________________________________________
E a rly retirement benefits___________________________________________________________________________
D isab ility retirement benefits_______________________________________________________________________

III




(VII)

1
1
2
3
4
5
6
6
8
8
2
3
4
5
9
10
10
11
11
13

9
10
11
12
10
15
15
15
15
16
17
17
17
17
17
19
19
20
22
23

Contents—Continued
P a rt I I I — Continued
Tables:
1. Types of retirement benefits provided, by number of plans and workers, 1952____________________
2. M in im u m age and service requirements for participation__ ______________________________________
3. M in im u m age and service requirements for normal, early, and disability retirement benefits_________
4. Types of basic normal benefit formulas, b y method of financing__________________________________
5. Provisions for including prim ary Social Security benefits in basic normal benefit formulas, by plans and
workers covered__________________________________________________________________________
6. Am ount of normal retirement benefits, including prim ary Social Security, for selected levels of earnings
and years of credited service_______________________________________________________________
7. Average normal retirement benefits expressed as percentage of selected earnings level_______
8. Distribu tion of plans by percentage of total m onthly benefit (including prim ary Social Security)
paid by the plan for selected earnings and service categories, b y method of financing____________
Charts:
1. T ypes of retirement benefits under pension plans, 1952_________________________________________
2. Am ounts of normal m onthly retirement benefits under pension plans for $3,000 a year and 30 years’
service, 1952_____________________________________________________________________________
3. Am ounts of normal m onthly retirement benefits under pension plans for $4,000 a year and 30 years’
service, 1952_____________________________________________________________________________

(v i i i )




Page
15
16
18
19
20
21
22
23
16
21
22

Pension Plans Under Collective Bargaining
Part I—Vested Rights
W
has been focused in recent
years on private pension plans, particularly on
those established through collective bargaining.
The establishment of “$100 pensions” in the steel
industry in 1949 and the movement toward slightly
higher pensions in other industries in 1950 served
further to stimulate this interest as collectively
bargained programs spread through large seg­
ments of industry. Although most attention has
been directed to the rapid growth of these plans
and the amounts of the benefits provided, other
problems and implications also need close scrutiny.
The present article contains, first, an analysis
of the extent and nature of vested rights in a sig­
nificant group of pension plans under collective
bargaining. An effort is made, second, to relate
vesting, the development of multiemployer pen­
sion plans, and early retirement provisions to the
problem of labor mobility.
The primary purpose of pension plans is to pro­
vide income for workers when they retire from the
labor force. In order to receive these benefits,
plans generally provide that workers must fulfill
certain requirements, usually a stipulated amount
of continuous membership in the plan and attain­
ment of a prescribed normal or early retirement
age. However, many workers change employers
before becoming eligible for retirement benefits
and, in doing so, lose all rights to their accrued
pension credits.
One means of protecting a worker’s credits under
separate pension plans is provided by vesting.
This is the guarantee to an individual of that
right or equity in a pension plan based on all or
part of the employer’s contribution made in his
behalf should his employment be terminated
before becoming eligible for retirement benefits.
Contributions made by an employee under a plan
financed by both the company and the employee

(contributory plan) are almost invariably returned
to the worker, with or without interest, should his
employment be terminated prior to retirement.
The vested right in most cases is granted in the
form of an annuity, the payment of which com­
mences when the worker reaches retirement age.
Occasionally, vesting provisions contain an option
under which the worker can receive a lump-sum
benefit when he leaves the company.

id e s p r e a d in t e r e s t

273682—53-----2



Analysis of Plans

In order to ascertain the prevalence and charac­
teristics of vesting provisions, the Bureau of Labor
Statistics analyzed 300 pension plans, all of which
were under collective bargaining.*1 These pro­
grams covered approximately 5,857,000 workers.2
Over three-fourths of the plans covering two-thirds
of the workers were in manufacturing industries.
Represented in the study was virtually every major
manufacturing industry as well as many non­
manufacturing industries in which collectively
bargained pension plans existed. The programs
varied in size from those covering well over
100.000 workers to those applying to less than
1.000 employees (table 1).
Eighty-five percent of the plans were restricted
to single companies, the great majority of which
had two or more plants. In some multiplantcompanies, the area covered by the program was
limited to one plant; generally, however, the pro­
gram applied uniformly throughout all plants of
the company. These single-employer plans cov­
ered slightly over three-fourths of the workers in

a)

* For the purpose of this study, plans under collective bargaining include
(1) those established for the first time as a result of collective bargaining and
(2) those originally established by either employer or union but since brought
within the scope of the agreement, at least to the extent of the agreement
establishing employer responsibility to continue or provide certain benefits.
All of the 300 plans covered in this analysis were in effect in early fall of 1952.
* Not all these workers are subject to collective-bargaining agreements.
While every plan is under agreement, in many cases the plans are extended
uniformly to cover workers outside the scope of the contract. In every
instance, the figures represent the total number of workers in all units to
which the plan applies.

2

deferred full vesting. Another type of deferred
vesting grants only those benefit rights based on a
certain percentage of the employer’s contributions
after specified conditions are met, and this per­
centage increases as additional conditions are ful­
filled until eventually the worker is fully vested.
For example, a plan may require participation for
10 years to acquire vested rights to one-third of the
employer’s contributions, 15 years for two-thirds
and 20 years for full vesting. This type of pro­
vision is generally termed deferred graded vesting.
Deferred full vesting was the predominant type
of vesting found in the study. This provision was
contained in over four-fifths of the plans—covering
a similar percentage of the workers—which pro­
vided for vesting (table 2). The remaining vested
plans were of the deferred graded type. None of
the plans gave employees full vesting rights im­
mediately upon participation in the plan.
Only three of the vested plans granted workers
cash benefits when they left their jobs after ful­
filling the necessary age and service requirements;
under these plans, no provision was made for
deferred annuities. With the exception of two
plans which offered workers the choice of receiving
either cash or deferred benefits, the remaining pro­
grams specified that the vested rights would be
granted in the form of a deferred annuity com­
mencing at the normal retirement date; a few of
these contained an option under which workers
could begin receiving benefits when they reached
early retirement age.

the study. Multiemployer programs accounted
for the remaining plans and workers.
Three-fourths of the plans, covering almost
four-fifths of the workers, were financed solely by
employer contributions (noncontributory plans).
The remainder were contributory, usually with
the employer paying the greater share of the
cost.8
Characteristics of Vesting Provisions

The number of plans and workers covered by
vesting provisions in the study and the method of
financing these plans are shown in table 2. Of
the 255 single-employer programs, 73, covering 27
percent of the workers under that type of plan,
provided for vesting. Only two of the multiem­
ployer plans granted workers vested rights.
Pension plans may provide for various types of
vested rights. Immediate full vesting grants to
the worker rights to all benefits based on the em­
ployer’s contributions which are made in his behalf
from the date he begins participation in the plan.
A provision under which the receipt of all rights
are deferred until a worker attains a certain age
and/or has completed a specified period of employ­
ment or participation in the plan is known as
>Some plans provided for a basic noncontributory pension, and workers
were given an opportunity to contribute to build up a supplementary an­
nuity. In these cases, only the noncontributory plan was analyzed. A few
plans were noncontributory for workers eamiDg less than a specified amount,
e. g., $3,000 per year, and contributions were required from those earning
over that amount. These plans were classified as contributory programs.

T able

1.—

D is tr ib u tio n o f p la n s i n survey, by w orkers covered a n d by type o f em ployer u n it

All plans
Workers

Plans

Workers covered

Single-employer plan3
Plans

Multiemployer plans

Workers

Plans

Workers

Number Percent Number Percent Number Percent Number Percent Number Percent
Number Percent (thousands)
(thousands)
(thousands)
Total................................
Over 100,000....................
50,000-99,999....................
25,000-49,999....................
15,000-24,999.....................
10,000-14,999....................
7,000-9,999........................
5,000-6,999........................
4,000-4,999........................
3,000-3,999........................
2,000-2,999........................
1,000-1,999........................
Below 1,000......................
1 Less than 0.1 percent.




300
io~
12
26
27
33
22
25
23
29
39
33
21

100.0
jTT
4.0
8.7
9.0
11.0
7.3
8.3
7.7
9.7
13.0
11.0
7.0

5,857.3
2,590.3
833.8
860.1
510.5
379.5
177.9
148.9
99.9
99.9
96.5
47.5
12.5

100.0
44.4
14.2
14.7
8.7
6.5
3.0
2.5
1.7
1.7
1.6
.8
.2

255
7
7
26
24
26
20
22
20
26
31
26
20

100.0
%T

2.7
10.2
9.4
10.2
7.8
8.7
7.8
10.2
12.3
10.2
7.8

4,496.6
1,791.4
485.6
860.1
458.5
303.2
162.7
130.9
86.9
90.3
77.3
37.9
11.8

100.0
40.0
10.8
19.1
10.2
6.7
3.6
2.9
1.9
2.0
1.7
.8
.3

45
3
5
3
7
2
3
3
3
8
7
1

100.0
6.7
11.1
6.7
15.5
4.5
6.7
6.7
6.7
17.7
15.5
2.2

1,360.7
798.9
348.2
52.0
76.3
15.1
18.1
13.0
9.6
19.2
9.6
.7

100.0
58.7
25.6
3.8
5.6
1.1
1.3
1.0
.7
1.4
.7
0)

3
T able 2 —Vested and nonvested plans and workers covered, by type of vesting and method of financing
Plans

Total...........................................................
With vesting provisions *_______ ____
Deferred full vesting.........................
Deferred graded vesting...................
Without vesting provisions....................

Plans

Contributory plans

Noncontributory plans

All plans
Workers

Plans

Workers

Workers

Plans

Number
Number
Number
Number Percent (thou­ Percent Number Percent (thou­ Percent Number Percent (thou­ Percent
sands)
sands)
sands)
300
75
61
14
225

100.0 5,857.3
967.1
25.0
829.3
20.3
4.7
137.8
75.0 4,890.2

100.0
16.5
14.1
2.4
83.5

225
18
14
4
207

100.0 4,592.0
121.4
8.0
6.2
90.6
1.8
30.8
92.0 4,470.6

100.0
2.6
1.9
.7
97.4

75
57
47
10
18

100.0
76.0
62.7
13.3
24.0

1,265.3
845.7
738.8
106.9
419.6

100.0
66.8
58.4
8.4i
33.2

* None of the 75 plans including vesting provided for immediate full vesting.
Requirements for Vesting

The requirements which workers must fulfill
before being vested varied greatly among the
plans. Some programs prescribed specified lengths
of service before workers were vested. Others
provided that vesting rights were accrued after
the completion of stipulated periods of partici­
pation in the plan; these programs often did not
permit a worker to join the plan when he first
became employed. Frequently, he was required
to work with the company for periods ranging
from 1 to 5 years before he was eligible to be
covered by the pension plan, and often age quali­
fications also had to be fulfilled. Age, service,
and participation requirements of plans providing
for deferred full vesting are shown in table 3.
Assuming that all workers join the plan when
first eligible, the plans under which vesting is con­
ditioned upon participation requirements may be
made comparable to those specifying service
qualifications by adding the required prepartici­
pation period to the plan membership period.
Using this approach, the service requirements of
all deferred full vested plans ranged from 5 to 25
years, with the median plan providing that a
worker must have been employed for 13 years
before acquiring vested rights. It is to be remem­
bered, however, that service qualifications were
not the sole requirement for vesting. In a num­
ber of plans, as indicated above, the attainment of
a specified age, almost invariably 45 years or over,
was also required before vesting occurred.
The plans with deferred graded vesting also
varied greatly in the requirements to be fulfilled



before a worker had vested rights. The minimum
qualification before any part of the employer's
share was vested ranged from 5 to 12 years' serv­
ice, except for one plan, contingent upon age
alone, which granted 2% percent of the employer's
share for each year of age the worker was over 25.
Nine of the 14 plans with deferred graded vesting
required 10 years of service before any vesting
took place, and 2 of these had age restrictions as
well. The methods of grading also ranged widely.
The most common method was to vest half of the
employer's contributions after 10 years' service,
and 5 percent additional for each year of service
over 10 until the worker was fully vested after 20
years' employment. Other methods were to vest
the employer's contributions by quarters or thirds
after specified service conditions had been fulfilled.
Half the plans with deferred graded vesting re­
quired 20 years' employment before full vesting
was achieved. In other cases, the maximum serv­
ice period specified ranged from 15 to 30 years.4
Although the purpose of vesting is to protect the
pension equity of those workers who leave their
jobs before becoming eligible for retirement bene­
fits, the presence of restrictive requirements to
qualify for vesting found in many of the plans
analyzed would tend to limit the value of this
provision. The qualification of at least 10 years'
service that was present in over three-fourths of
the plans would restrict considerably the number
who might benefit by vesting. (See chart.)
4 Two of these deferred graded plans conditioned vesting rights upon
participation requirements. In these two cases, the period required before
participation could begin was added to the plan membership period in the
data presented in this paragraph.

4
visions, aside from the influence of pension credits
on labor mobility discussed later, is that the plan
can be made more appealing to the younger em­
Plans
Workers
ployees,
who generally are less concerned with the
Requirements for vesting3
Number
problems
of retirement.
Number Percent (thou­ Percent
sands)
Certain considerations exert influence against
the inclusion of vesting rights. One is the feeling
Total................................................
829.3
61
100.0
100.0
that labor turnover will be increased, thereby
Service.............................................
17
29.0
198.7
24.0
5 years..........................................
3
5.0
8.0
1.0
raising
replacement and training costs for the
10’years........................................
9
15.8
148.8
17.9
15 years.........................................
3
5.0
37.3
4.5
employer
who provides vesting in his pension
20 years.........................................
2
3.2
4.6
.6
Participation............... .................
14
22.6
347.4
41.9
plan.
A
more
important consideration is that
6 years.........................................
6
114.3
13.8
9.8
5
10 years..................................
5.4
44.8
8.0
the
inclusion
of
vesting,
assuming the same levels
1
15 years—..................................
1.6
.3
2.8
2
20 years....................................... .
3.2
22.4
185.5
of
benefits,
increases
the
cost of the plan. In a
16
Age and service_______________
190.1
22.9
26.0
Age 40 and 5 years’ service........
42.8
5.1
1
1.6
nonvested
plan,
the
amounts
contributed in be­
Age 40 and 10 years’ service___
1
5.2
1.6
43.3
4
Age 45 and 15 years’ service___
18.1
2.2
6.4
half
of
those
workers
who
lea
ve
their jobs remain
Age 50 and 10 years’ service___
1
1.6
1.0
.1
Age 50 and 20 years’ service___
3
5.0
3.8
31.5
in
the
fund.
These
forfeited
funds
may be used
Age 50 and 25 years’ service___
3.2
2
33.6
4.1
Age 55 and 20 years’ service___
15.6
1.9
3
5.0
either
to
lower
the
size
of
the
contributions
to
Age 60 and 15 years’ service___
1.6
4.2
1
.5
Age and participation.............. ___
24.4
5
8.0
3.0
the
plan
or
to
increase
the
size
of
the
benefits
for
Age 45 and 5 years’ participa­
1_
tion_____________
4.7
1.6
.6
those who remain until retirement age.
Age 45 and 10 years’ participa­
tion.................................... _
2
3.2
1.3
10.7
However, m many cases, the cost of vesting is
Age 45 and 15 years’ participa­
1
tion.........................................
4.2
1.6
.5
not
as large as it might seem from first observa­
Age 50 and 10 years’ participa­
1
tion....... ................................
.6
1.6
4.8
tion.
One mitigating factor is that labor turn­
Service and participation______
2
2.4
3.2
20.3
10 years’ service of which 5
over
is
usually concentrated among the younger
1
must be participation_____
2.2
1.6
18.5
15 years’ service of which 5
workers.
Under plans which provide for imme­
1
must be participation______
.2
1.6
1.8
1
Service or participation________
1.6
4.5
.5
diate
full
vesting,
the amounts paid to these younger
25 years* service or 10 years’
1
participation.............. ..............
1.6
.5
4.5
workers
when
they
terminate their employment
Age, service, and participation...
2.2
1
1.6
.3
Age 55 and 15 years’ service of
1.6
2.2
which 2 must be participation.
1
.3 "will be relatively small. If the pension program
Alternatives_____ ... .
4
6.4
34.4
4.1
contains provisions which require a long waiting
Age 45 and 5 years' participa­
tion, or 10 years’ participation.
1
1.6
13.0
1.5
period before benefits are vested, the ultimate cost
Age 45 and 10 years’ service, or
1
15 years’ service.......................
1.6
.5
4.0
of
this provision will be lowered, since a large pro­
Age 50 and 14 years’ participa­
1
tion, or 19 years’ participation.
1.6
4.1
.5
portion
of the individuals who change their jobs
Age 50 and 20 years’ service, or
1
15 years’ participation........
1.6
1.6
13.3
will
not
be
entitled to any benefits and since many
1
O ther...............
1.6
7.3
.9
15 years' vesting service where
of
those
having
sufficient service to possess vest­
1 year of vesting service is
given for each year’s service
ing
rights
will
remain
on their jobs until retire­
up to age 40, 2 years for each
year between age 40 and 50,
ment
age
is
reached.
Another
factor influencing
and 3 years for each year’s
service over age 50
1
1.6
7.3
.9
the cost of vesting is the percentage of the total
contributions to the plan paid by the worker
1 Based on a study of 300 pension plans covering approximately 5,857,000
workers.
under
a contributory program. In general, the
* Service refers to the period of employment of the individual, while par­
ticipation includes only the plan membership time. Both may be identical
cost
of
vesting becomes smaller as the proportion
or may vary if eligibility requirements prerequisite to membership in the
program are specified or if the individual, although eligible to join the plan,
of
the
total
cost of the plan paid by the employees
declines to do so.
becomes greater.
Union attitudes toward vesting have not been
Attitudes Toward Vesting
uniform. Many unions have worked to establish
The decision on whether to include vesting multiemployer pension plans, in which the need
provisions in a pension plan is influenced by several for vested rights diminishes as the area covered
factors. Favorable to the inclusion of vesting is by the program increases. For these plans, the
the concept that pensions and other fringe benefits question of vesting has not been considered as one
constitute withheld wage payments. As such, of paramount importance.
they represent earnings in which a worker has a
In negotiations for single-employer programs,
vested right should he leave his job. Another unions have directed considerable attention to the
consideration advanced in favor of vesting pro­ funding of the plan and the amounts of benefits.
T able 3.— P la n s

a n d w orkers covered by deferred f u l l vesting,
by requirem ents f o r vesting 1




5
While vesting rights have also been considered
desirable and in many cases actively sought, this
feature has not been incorporated in the great pro­
portion of negotiated plans. Many of these pen­
sion plans contained provisions that the programs
will continue for a period of 3 to 5 years before
further bargaining on proposed changes can be
undertaken. In view of the declared intentions
of many union leaders, the inclusion of vesting
rights will very likely be one of the union demands
when these negotiations take place. The atti­
tude of the United Automobile Workers (CIO)
was expressed by its president in a statement to
the union’s 1951 convention: “ We have to fight to
get vested rights and the ability to transfer credits.
. . . The guaranteed funded program is the key
to these other matters, because when the money
is in a trust fund you can go after these other
things much easier . . . ” 6
With reference to establishing new pension
plans, the American Federation of Labor has
expressed the opinion that vested rights should be
provided when a plan is first put into operation,
even if this inclusion results in the lowering of the
level of retirement benefits. “ The level of benefits
can be improved through later negotiations, while
the protection of earned pension rights—through
a vesting provision or through a multiemployer
arrangement—can be more readily accomplished
at the inception of the plan than at a later date
after the plan has been set up on some other basis.” 6
Pension Plans and Labor Mobility

The fear has frequently been expressed that
labor mobility may be restricted by pension pro­
grams that require continuous membership for
long periods in order for a worker to qualify for
benefits. Many workers may be unwilling to
leave establishments in which they have built up
substantial credits toward retirement annuities.
Pension plans are, of course, only one factor to be
considered in labor mobility. Many other con­
ditions will also influence a worker’s decision on
whether to change jobs.
In any dynamic economy, there is a substantial
amount of shifting of workers among employers.
1 Proceedings of Thirteenth Constitutional Convention, United Auto­
mobile, Aircraft, and Agricultural Implement Workers of America, April
1-6,1951.
• Pension Plans Under Collective Bargaining: A Reference Guide for
Trade Unions. American Federation of Labor (p. 74).



Vesting Rights of Workers Under Pension Plans, After
M eeting Service Requirements, 1952
WORKERS
ARE FULLY
NT
VESTED: Q 10 20 30 40 50 60 70 80PERCE90
-----1
----1
------j
---------1
T" nr
After
,5 Years
-Workers
- Plans
Within
10 Years
_ l----------,

Within
20 Years

No
Vesting
Rights
BUUNRITEAEUDOSFTALATBEOSRDSETAPTAIRSTTICM*ENTOFLABOR
N o t e — Based on a study of 300 pension plans under collective bar­
gaining, covering approximately 5,857,300 workers. Many of these
plans also specified age requirements to be fulfilled before vesting
took place.

A study made by the Bureau of the Census reveals
the extent to which this occurs.*•7 Of wage and
salary workers employed in nonagricultural indus­
tries in January 1951, only about one out of every
five had been working for the same employer a
decade earlier. Stability of employment varied
among these industries. Whereas only about 1
of every 10 workers in the construction industry
remained with the same employer during this
period, nearly a third of the workers in transpor­
tation, communication, and other public utilities
did so.
The Census survey defined a break in continuous
period of employment as occurring when layoff
exceeded 30 days and when a worker was inducted
into military service. Pension plans usually allow
longer periods of layoff, as well as all authorized
military service, before continuous service is
7 Data in this paragraph are from U. S. Department of Commerce, Bureau
of the Census, released in Current Population Reports, Labor Force, Decem­
ber 5, 1951 (Series P-50, No. 36): Experience of Workers at Their Current
Jobs, January 1951. For further discussion of this subject, see also Job
Tenure of American Workers, Monthly Labor Review, September 1952
(p. 257) and The Mobility of Tool and Die Makers, Monthly Labor Review,
December 1952 (p. 605).

6

deemed to be broken. While these practices would
tend to increase median length of service figures
as reported by the Census, eligibility requirements
prior to participation in some pension plans would
tend to reduce the amount of allowable working
time counted toward pension credits. In any
case, the relatively short job tenure of many
workers will prevent them from accruing credits
toward retirement income during much of their
working life. On the other hand, once an employee
has secured substantial credits in a pension plan,
his willingness to shift employers might be affected
by his desire to retain pension rights.
To the extent that private pension plans do in
fact act as a brake upon desirable labor mobility,
their retarding effect can be mitigated in several
ways.
Vesting Rights

Reluctance to change employers due to loss of
pension rights presumably can be reduced through
vesting. Liberal provisions, particularly those
under which the worker is given partial or full
vesting rights in the plan immediately upon
participation, would serve to reduce this reluc­
tance. Under such provisions, should the worker
change employment he would retain an equity in
his accrued pension credits and, thus, the assurance
of at least some income upon reaching retirement
age, irrespective of his employment status. Wide­
spread application of such provisions would permit
a worker to receive retirement benefits under many
different plans.
Although the immediate concern of a worker
contemplating a change of employers may be the
potential loss of his accrued rights, the presence
or absence of vesting provisions in the plan of his
prospective employer may also affect his decision
to move. The existence of a plan with a liberal
vesting provision would presumably make the job
more attractive and would be particularly im­
portant in a defense economy where the need for
additional workers in defense jobs may be only
for short durations.
As has been pointed out, however, the presence
of a vesting provision in a plan does not necessarily
protect the accrued credits of all individuals
whose employment is terminated, inasmuch as
these rights are usually conditioned upon the
completion of a stated period of credited service



and/or the attainment of a specified age. For
workers whose job tenure is relatively short, such
restrictions would tend to limit their ability to
become vested.
Multiemployer Plans

Another means of protecting pension credits is to
broaden the area covered by the plan, thus
enabling a worker who moves from one firm to
another to transfer his pension credits with him.
As the number of establishments covered by a
program increases, the degree of mobility that a
worker is allowed without losing pension rights
also becomes greater. Usually a worker must
move to another job covered by the same pension
plan to be able to transfer his pension credits,
although examples of reciprocity arrangements
between different programs do exist.
The pension plans of most multiplant companies
permit workers employed in one plant or occupa­
tion to shift to other plants or occupations in the
company without loss of pension credits. Under
this type of plan, the freedom of movement may
be restricted to a few plants within the same local
area or may be extended nationwide—sometimes
even across industry lines—depending upon the
nature and size of the corporation involved.
Programs covering more than one employer
occur in many and varied industries. The com­
mon bond which links employers, who are engaged
in a particular type of work, in one program
usually is collective-bargaining relations with one
union.
Often the scope of these plans is confined to a
metropolitan area. In the New York area, for
example, many employers in the wholesale and
warehouse industry contribute to one pension
fund for the benefit of their workers who are
members of the Distributing, Processing, and
Office Workers of America (Ind.). New York and
Chicago milk truckdrivers who are members of the
International Brotherhood of Teamsters (AFL)
are covered by pension funds to which their re­
spective employers contribute. In cases where
the fund includes most of an industry’s employers
within a metropolitan area, considerable freedom
of movement is provided the workers with no loss
in pension rights. However, multiemployer funds
of this type are often restricted to companies
employing workers in one occupational group.

7

For example, in the construction industry in the
New York area, separate pension plans are in
operation for the painters and decorators, elec­
trical workers, roofers, and sheet-metal workers,
and other crafts.
Collective-bargaining practices which have de­
veloped in some industries have resulted in the
extension of multiemployer plans beyond a metro­
politan area. In the longshore industry on the
West Coast, a pension fund has been established
under the coastwide agreement between the Pacific
Maritime Association and the International Long­
shoremen's and Warehousemen's Union (Ind.).
Workers under the agreement of the American
Federation of Hosiery Workers (AFL) with the
Full-Fashioned Hosiery Manufacturers of America,
located primarily in the eastern Pennsylvania and
New Jersey area, are covered by one program
which protects the individual against loss of pen­
sion credits as long as he is employed by any
employer member of the plan.
Plans of an even wider scope, covering a great
proportion of all the workers in an industry, are
rare. Perhaps the best publicized plan most
nearly industrywide in scope is that found in the
bituminous coal industry. The United Mine
Workers Welfare and Retirement Fund covers a
great proportion of the entire soft-coal industry;
employers who bargain with the United Mine
Workers of America (Ind.) contribute 40 cents
per ton of coal mined to the fund. In the an­
thracite industry, a similar pension plan exists.
Another example of a program which covers a high
proportion of workers in an industry is found in
the men's and boys' suit and coat industry.
Manufacturers located in New York, Philadelphia,
Chicago, and other principal cities contribute to
one retirement fund for the benefit of their
workers who are members of the Amalgamated
Clothing Workers of America (CIO).
The right to move from one pension program
to another gives a worker an additional degree
of mobility without endangering his retirement
credits. In the women's garment industry, a
system of reciprocity between various plans of the
International Ladies' Garment Workers' Union
(AFL) has been established to insure retirement
income to those workers who do not have the
necessary service requirements to receive benefits
from any one fund but who meet those require­
ments if their combined length of service under



various plans in the industry is taken into account.
Each separate ILGWU retirement fund con­
tributes 1 percent of its income to the Reciprocal
Retirement Fund, which pays benefits to those
not qualifying under any one pension plan.
Among the ILGWU affiliates already participating
in the reciprocal arrangement are the New York
Cloak and Dress Joint Boards, the South Jersey
Joint Board, the Eastern Regional Retirement
Fund, and some local unions with their own
separate pension programs. The union's general
executive board has announced it will request the
1953 convention to make participation in the
central fund mandatory upon all garment-industry
retirement plans.8
Multiemployer pension plans operate generally
within one industry, while the geographical area
covered may vary considerably. The Toledo
(Ohio) Area Pension Plan represents a different
approach in that it covers companies in many
different industries but located within one metro­
politan area. Negotiated by the United Auto­
mobile Workers (CIO), the plan covered about
1,300 workers employed by 19 different companies
in December 1951; the number of workers covered
by each employer ranged from below 10 to above
200. Under this plan, a worker may move from
one employer to another covered by the program
and continue to accumulate his pension credits.
Thus, multiemployer pension plans generally
afford protection to a worker shifting jobs only
if he remains within the particular industry or
area. In many instances, however, a worker
changes occupation or location when he shifts
jobs. In March 1944, one out of every six
civilian workers was employed in an industry
group different from the one he had been employed
in the week before Pearl Harbor.9 In the year
following the end of hostilities, a return to a peace­
time economy brought a new wave of shifts in
employment, affecting one of every eight civilian
workers. These data refer only to shifts between
broad industry groups, e. g., shifts between agri­
culture and manufacturing or between sales work
and skilled trades. If transfers among individual
industries or occupations were counted, the
total number of employment changes would be
increased.
s International Ladies’ Garment Workers** Union, J u s tic e , Vol. XXXIV,
No. 18. September 15, 1952.
• Fact Book on Manpower, U. S. Department of Labor, Bureau of Labor
Statistics, January 1951. Source: U. S. Bureau of the Census.

3

Shifts in geographical location also occur fre­
quently. In March 1945, over 15 million persons
in the civilian population were living in a different
county from that in which they lived in December
1941.10 Of these, 7.7 million were living in a
different State. From April 1948 to April 1949,
over 8 million persons in the civilian population
moved from one county to another, with over
half of these having moved to a different State.
Early Retirement Benefits

While vesting provisions and multiestablish­
ment plans are the primary means of protecting
a worker's pension credits prior to qualifying for
retirement benefits, under many plans a worker
is entitled to an early retirement benefit before
the attainment of the normal retirement age and
after the completion of a specified number of
years of service. Although the primary purpose
of this benefit is to provide income to those workers
who fulfill the necessary qualifications and who
wish to withdraw from the labor force before reach­
ing normal retirement age, some individuals who
desire to change jobs may retire earlier, either
drawing their monthly annuities while employed
elsewhere or deferring the payment of benefits
until normal retirement age.
The Bureau's study of pension plans showed
that early retirement provisions were more prev­
alent than those providing for vesting. While
only one-fourth of the plans, covering one out of
every six workers, granted vested rights, over half
the plans, with a similar proportion of workers,
provided for early retirement. Over three of every
five single-employer programs provided this benefit;
on the other hand, multiemployer plans only
rarely included it.
In the plans providing for early retirement,
workers were usually eligible to retire 5 or 10
years before their normal retirement age, generally
after having been covered by the plan for a
Ibid.




substantial period of time. The attainment of
age 55 or 60 was the most prevalent requirement
found, and in cases covering a majority of the
workers, the completion of 15, 20, or more years
of credited service was also necessary to qualify
for early retirement.
In many plans, the right of a worker to retire
early was contingent upon the consent of the
employer. Over two-fifths of the plans, providing
for early retirement and applying to more than
one of every four workers covered by this benefit,
required workers to obtain company approval in
order to retire early.
Although early retirement provides a method
whereby older workers can terminate their em­
ployment without losing pension benefits, workers
in this age group usually have greater stability of
employment than younger workers. Conse­
quently, those who qualify for early retirement
benefits are less likely to change jobs.
Other Benefits

Another approach to the problem of providing
benefits for workers who terminate their employ­
ment is through the inclusion of severance benefits.
When integrated with pension plans or established
in lieu of such programs, severance benefits often
provide a lump-sum benefit to those whose employ­
ment is terminated before retirement. In other
instances, as in the collective-bargaining agree­
ments of some companies in the rubber-manu­
facturing industry, severance pay is given to those
who have reached retirement age but who have
not accumulated sufficient service to qualify for
a pension.
Disability provisions grant benefits to eligible
workers who become permanently and totally
disabled prior to normal retirement age. Since
eligibility for this benefit is conditioned upon
physical incapacity and is payable only as long as
the worker is unable to rejoin the labor force, a
discussion of this provision is outside the scope
of this report.

Part II—Compulsory Retirement
An
upon the relationship
between the number of older persons in the labor
force and the number retired from work is the age
at which cessation, of employment occurs. As
the population continues to grow older, an increase
in the proportion of the total population that is
no longer in the labor force can be expected. In
view of the trend toward a longer life span, es­
pecially if coupled with extension in the average
length of “working life” capacity, the inflexible
application of mandatory retirement ages would
presumably result in an increasing amount of
unused manpower. Determination of when work­
ers should be retired thus becomes an important
factor affecting labor utilization.
Since 1900, the population of the United States
has doubled and its age composition has undergone
profound changes. One of the most significant
changes has been the rise in the proportion of
older persons. In 1900, about 4 percent of the
population was aged 65 or over; by 1950, this
proportion had doubled.11 Accompanying this in­
crease in the proportion of older persons has been
a declining trend in labor-force participation
among older men, especially with respect to those
aged 65 or over. In 1890, about two-thirds of all
men in this age group were in the labor force; the
proportion had dropped to a little over 40 percent
in 1950. (The proportion of women in this age
group in the labor force has remained fairly con­
stant and was about 8 percent in 1950.) As a
result, the number of persons aged 65 and over
im p o r t a n t in f l u e n c e

11 Data In this paragraph are from Bulletin 1092: Employment and Eco­
nomic Status of Older Men and Women. Washington, Bureau of Labor
Statistics, May 1952.
T able

1.— P la n s

not in the labor force has grown from less than 2
million in 1900 to 9.4 million in 1950.
Private pension plans have helped to formalize
the age at which workers retire from the labor
force. Invariably, these plans provide for a nor­
mal retirement age. Generally, the normal re­
tirement age is the earliest age at which a worker,
having qualified for benefits, may retire at his own
volition and receive the full amount of benefits
to which his length of service or amount of earn­
ings, or both, entitles him under the normal re­
tirement provisions of the plan. While workers
may be permitted to continue in employment
past this age, the establishment of a normal age
serves to formalize personnel actions with respect
to retirement so that all workers covered by the
program are treated alike. As pension plans come
within the scope of collective bargaining, retire­
ment ages become matters of labor-management
negotiation. The widespread attention which has
been focused on these plans has helped to publicize
the concept of a formal, uniform retirement age,
and has probably influenced the development of
policies with respect to older workers in other com­
panies which do not maintain formal pension
programs.
The impact that pension plans have upon the
utilization of manpower will be determined, in
part, by whether retirement is made mandatory
through compulsory retirement provisions and, if
so, at what ages. As defined in this report, the
age of compulsory retirement is that age at which
a worker can be retired by reason of age alone.
It is that point at which the worker loses the privi­
lege of deciding whether he should retire or con­
tinue on his job. Retirement is not necessarily
mandatory under such a provision, for a worker
,

a n d w orkers covered by c o m p u ls o ry a n d a utom atic retirem ent p ro v is io n s by typ e o f em p lo yer u n it

Single-employer plans

AH plans
Provision

Plans
Num­
ber

Total.............— ............................. -........
With compulsory retirement_________
With automatic retirement______
Without automatic retirement____
Without compulsory retirement.......... .




300
175
61
114
125

Workers
Per­
cent

Number
(thou­
sands)

Per­
cent

100.0
58.3
20.3
38.0
41.7

5,857.3
3,376. 5
679.8
2,696.7
2,480.8

100.0
57.6
11.6
46.0
42.4

Workers

Plans
Num­
ber
255
172
60
112
83

Multiemployer plans

Per­
cent

Number
(thou­
sands)

100.0 4 496.6
67.5 3,337.7
23.5
665.5
44.0 2,672.2
32.5 1,158.9

Per­
cent
100.0
74.2
14.8
59.4
25.8

Plans
Num­
ber
45
3
1
2
42

Workers

Per­
cent

Number
(thou­
sands)

100.0
6.7
2.2
4.5
93.3

1,360.7
38.8
14.3
24.5
1,321.9

Per­
cent
100.0
2.9
1.1
1.8
97.1

10

Compulsory Retirement Provisions in Pension
Plans, 1952
Compulsory
Retirement 0r 1.........
et AgeoF:

10
T,,w

........^20

Analysis of Plans

Percent

o .............1 'i50

—i 30
t"*.

40

65

68

70

No
Compulsory
Retirement

N ote: based on a study of 300 pension plans under collective bargaining,
covering approximately 5,857,000 workers. Three plans, covering approx­
imately 42,300 workers and providing for compulsory retirement at ages
other than those shown are excluded from the chart.

may be permitted to continue to work after reach­
ing the compulsory age. Under some plans no
provision is made for working beyond the compul­
sory age or beyond a specified later age. Such a
provision is called automatic retirement.
This article analyzes the extent and nature of
provisions for normal, compulsory, and automatic
retirement in 300 pension plans under collective
bargaining which were in effect in the fall of 1952
and covered approximately 5,857,000 workers.1112
In addition, an attempt is made to relate retire­
ment practices to labor utilization.
T able 2. — P la n s

11Not all these workers were subject to collective-bargaining agreements.
While every plan was under agreement, in many cases the plans were extended
uniformly to cover workers outside the scope of the contract. In every in­
stance, the figures represent the total number in all units to which the plan
applies.
The programs varied in size from those covering well over 100,000 workers
to those applying to less than 1,000 employees; 225 were financed entirely by
the employer; the remainder were contributory, usually with the employer
paying the greater share of the cost.

,

a n d w orkers covered by p ro v isio n s f o r co m p u lso ry retirem ent by typ e o f a d m in is tra tio n

Plans with compulsory retirement

All plans
Workers

Plans
Type of administration
Total...........................................................
Company_________________________
Company with union representation__
Company with individuals’ right to
appeal through grievance machinery
or to a bipartite committee...................
Combination of company and bipartite Bipartite..................................................
Tripartite _ _ _ ___________ _ __




Provisions
for compulsory retirement were contained in 175
of the 300 plans, covering almost 3 of every 5
workers in the study. Indefinite extensions
beyond the compulsory age could be granted by
the employer in 114 of these plans; the remainder
provided that workers would be automatically re­
tired upon reaching a specified age (table 1).
Only three multiemployer plans contained com­
pulsory retirement provisions, one of which also
stipulated an automatic age.
Generally, the analysis revealed that the greater
the degree of union participation in the administra­
tion of the plans the less likely were they to con­
tain compulsory retirement provisions. Only 12
of the 55 plans in which the union had equal rep­
resentation with the employer in administering the
program (bipartite or tripartite) provided for
compulsory retirement (table 2). On the other
hand, 88 of the 111 plans which were administered
solely by the company contained such provisions.
In about a third of all the plans, including many
of those negotiated by the United Steelworkers of
America (CIO), the company had full responsi­
bility for administering the plan; however, the
individual had the right to appeal decisions con-

Prevalence of Compulsory Retirement.

Plans

Workers

Plans without compulsory retirement
Plans

Workers

Number
Number
Number
Number Percent (thou­ Percent Number Percent (thou­ Percent Number Percent (thou­ Percent
sands)
sands)
sands)
300
111
3

100.0
100.0
100.0

5,857.3
1,964.3
6.2

100.0
100.0
100.0

175
88
2

58.3
79.3
66.7

3,376.5
1.748.2
2.7

57.6
89.0
43.5

125
23
1

41.7
20.7
33.3

2,480.8
216.1
3.5

42.4
11.0
56.5

01
40
48
7

100.0
100.0
100.0
100.0

1,572.0
906.0
576.1
832.7

100.0
100.0
100.0
100.0

39
34
12

42.9
85.0
25.0

690.1
862.2
73.3

43.9
95.2
12.7

52
6
36
7

57.1
15.0
75.0
100.0

881.9
43.8
502.8
832.7

56.1
4.8
87.3
100.0

11

cerning his eligibility for benefits through griev­
ance machinery or to a bipartite committee.
Well over half of the plans in this category did not
contain compulsory retirement provisions.
A combination of company and bipartite admin­
istration was found in 40 programs, notably in
those negotiated by the United Automobile
Workers (CIO). In these plans, a bipartite com­
mittee made all decisions concerning a worker's
eligibility for benefits and the amount of the ben­
efits to be provided in accordance with the provi­
sions of the agreement between the parties; other
functions of administration, such as investment of
funds, were performed by the company within the
terms of the contract. Over four-fifths of the
plans with this type of administration provided for
compulsory retirement.
Com pulsory Retirem ent Characteristics. The most
prevalent age for compulsory retirement was 65
years and was found in 60 percent of the 175 plans
including these provisions (table 3). With three
exceptions, the remaining compulsory plans speci­
fied either 68 or 70 as the age at which workers
could be retired by reason of age alone (see chart).
Twenty of the plans with compulsory provisions
stipulated a lower compulsory age for women,
which was 5 years earlier than that for men in all
but 2 cases. Significantly, all but 14 of the 300
plans also specified 65 as the normal retirement
age; a lower normal age for women, usually 5 years
earlier than for men, prevailed in 30 plans.
Generally, the lower the compulsory retirement
age, the greater was the chance that the plan per­
mitted extensions beyond that age with the con­
sent of the employer. Of the 104 plans stipu­
lating 65 as the compulsory age, only 9 provided
for automatic retirement at that age; 18 of the 50
plans with a compulsory age of 68 specified that a
worker could not be employed past that age; and
15 of the 18 plans with a compulsory age of 70
automatically retired workers at that age.
Of the 131 plans in which extensions beyond the
compulsory age could be granted, 114 placed no
maximum limits on the length of the extensions
which were, instead, subject to the discretion of
the employer. In the remaining cases, however,
the plans specified that extensions beyond the
compulsory age were limited to a maximum age,
usually 70, at which point the worker would be
automatically retired.



Under plans which allow a worker to remain in
employment after normal retirement age, an im­
portant consideration to the individual is whether
he is permitted to continue to build up credits
toward pension benefits. This concern, of course,
is less significant where maximum benefits under
T a bl e 3. —

P la n s a n d w orkers covered by c o m p u ls o ry re tire ­
m ent p ro v is io n s , by c o m p u ls o ry age specified a n d p ro v is io n
f o r autom atic retirem ent at the same or later age

1

‘ Total

Without automatic
retirement

With automatic
retirement

Compul­
Workers
Workers
Workers
sory re­
tirement
age* Plans Num­
Plans Num­
Plans Num­
ber Per­
ber Per­
ber Per­
(thou­ cent
(thou­ cent
(thou­ cent
sands)
sands)
sands)
Total........ 175 3,376.5 100.0
65 years— 104 2,232.0 100.0
66 years... 1 31.5 100.0
68 years... 50 968.8 100.0
69 years— 1
7.0 100.0
70 years_ 18 133.4 100.0
72 years— 1
3.8 100.0

114 2,696.7 79.9
81 1,964.4 88.0
29 674.0 69.6
1
7.0 100.0
3 51.3 38.5

61 679.8 20.1
231 267.6 12.0
31.5 100.0
21 294.8 30.4
15 82.1 61.5
1
3.8 100.0

1 Based on a study of 300 pension plans under collective bargaining covering
approximately 5,857,000 workers.
* 20 plans, covering 492,500 workers, specified a lower compulsory retirement
age for women than for men. In all but 2 cases, the age differential was 5
years; the other 2 programs specified differentials of 3 and 10 years.

a plan are based on a specified number of years of
service, as for example, 25 or 30 years. In many
such cases, workers would have fulfilled these re­
quirements prior to normal retirement age and
thus would have no need for additional credit.
Two-thirds of the 300 plans in the study per­
mitted the workers to continue to accumulate
credited service after the normal retirement age.
Of these, nearly 90 percent credited all such serv­
ice worked (table 4). Generally, the plans that
did not contain provisions for compulsory or auto­
matic retirement were more likely to allow a
worker to credit all service past his normal retire­
ment age than were programs with these provi­
sions. Of the 125 plans without compulsory
features, 107 allowed all service worked to be
credited. On the other hand, only 68 of the 175
compulsory plans credited all service worked.
Retirement Practices and Labor Utilization

As the trend toward a longer working life con­
tinues, retirement at a specified age, particularly
on an involuntary basis, would tend to increase
the number who have retired from the labor force
while still capable of productive work; or it would

12

diminish the efficiency of those able to find sub­
stitute employment in which skills developed over
long years of experience would not be utilized.
The efficiency of those retired and seeking
substitute work is further impaired by restrictive
features in some single-company retirement pro­
grams which prohibit payment of benefits under
certain conditions to those workers who are
reemployed by other firms in the industry, where
presumably their skills could best be utilized.
Restrictions on pensioners under multicompany
plans are well illustrated by a recent New York
State Department of Labor study of 13 industry­
wide retirement plans operating in that State.
The report states: “All but two of the pension
funds ban work by pensioners in the industry
covered by the fund. Pensioners are permitted to
work in other industries without foregoing pension
rights under 8 of the 13 plans studied, but they
may not earn more than $75 a month, according to
the rules of 5 programs, without losing pension
eligibility. Eleven of the thirteen programs allow
a retired worker to withdraw from the pension
rolls and return to work in his industry.” 13
-

T a ble 4. —

D is t r ib u t io n o f p la n s by specified n o rm a lt com
p u ls o r y t a n d a u tom atic retirem ent ages a n d by a m o u n t o f
service credited after n o rm a l retirem ent age

Specified retirement
age1
Normal

Service credited after normal
retirement age

Until Until
Com­ Auto­
pulsory matic None age 68 age 70

60
62
—
65
___
70
65
60
70
60
65
65
68
65
65
69
70
65
68
68
65
65
65
65
65
65
65
65
66
65
68
65
68
65
70
65
72
65
Total..........

—
___
___
___
___
___
___
___
’65
67
68
70
66
68
70
70
72

16
___
___
___
60
__2_
_1_
29
1_
9_
_1
4

—
103

1
___
___
__ 15
___
1
___
___
___
___
___
___
___
3
___
—
20

... .
1
___
___
1
___
___
___
___
___
___
___
___
___
___
___
___
___
—
2

All
9
1
96
1
1
___
20
11
1
___
1
___
___
2
2
1
3 17
___
11
1
175

Number
of plans
9
1
114
1
1
1
80
28
1
2
1
9
1
2
11
1
18
3
15
1

300

130 plans specified a lower normal retirement age for women than for men.
This differential was 5 years in all cases except 3 which stipulated 10 years:
22 of these plans provided for compulsory retirement; of these, 18 specified a
5-year differential, 2 stipulated 3 and 10 years, while the remaining 2 had no
differential.
i Under 1 of these plans, an employee with 12 or more years of service at age
65 was permitted to work and accrue credit until completion of 15 years'
service or age 68, whichever came earlier.
* 2 of these plans provided that workers who had not completed a stipulated
number of years of credited service at age 68 could, at the option of the em­
ployer, be permitted to work after age 68 until they had the required amount
of service. The amounts of credited service stipulated were 15 years in one
plan and 25 years in the other.



Provisions for a retirement age beyond which no
extensions could be granted were not widely
found in the 300 plans studied. Where such
practices occurred, their effect upon manpower
utilization was somewhat mitigated by the fact
that many plans set the mandatory age for ceasing
work at 3 to 5 years above normal retirement age.
More prevalent were compulsory retirement
provisions which did not specify an automatic
retirement age. However, the presence of these
provisions in a retirement plan would not indicate
the impact which they might have upon labor
utilization, since actual company practice might
be to ignore the compulsory ages by granting
indefinite periods of extension to some or all
workers. Such practice would most likely occur
during periods of labor shortages.
A recent Princeton University study of retire­
ment procedures in 14 companies revealed that
those firms with pension plans containing provi­
sion for extensions beyond the compulsory age
did not enforce retirement. “While a number of
these plans specified that employment beyond the
normal retirement age was possible only at the
request of and with the approval of management,
in practice the request has usually come from the
employee and management approval has been
routine.” 14 On the other hand, company practice
is, of course, subject to variations without any
changes in retirement-plan provisions. By pro­
viding the employer the right to retire workers
by reason of age alone, compulsory retirement
clauses could have an effect on labor utilization
if rigid adherence to the compulsory ages were
observed.
Another factor influencing the use of older
worker manpower is the age at which workers
voluntarily retire from the labor force while still
capable of productive work. If workers were to
retire at 65, the minimum age for receiving social
security benefits and the normal retirement age
specified in most private pension programs, a
considerable amount of manpower would be lost.
Recent studies indicate, however, that in practice
many workers continue in employment after reach­
13 Retirement Under Industry-wide Pension Programs Established
Through Collective Bargaining, New York State Department of Labor,
Division of Research and Statistics, December 1952.
14 Retirement Procedures Under Compulsory and Flexible Retirement
Policies, by Helen Baker, Industrial Relations Section, Princeton Univer­
sity, 1952 (p. 59).

13

ing age 65. Of about 3 million workers eligible emergency. Past experience in periods of sub­
for old-age insurance benefits under the Social stantially less than full employment suggests that
Security program at the end of 1950, about two- these practices could change. Such conditions
fifths were not receiving such benefits. The extent might produce automatic provisions in a greater
to which eligible workers were receiving benefits number of pension plans, enforcement of compul­
varied with age: about 35 percent of eligible sory retirement clauses, and the bringing of com­
workers aged 65 to 66, 49 percent of those aged munity social pressure to bear on older workers
67 to 68, 57 percent of those 69 to 70, and 82 to retire voluntarily as soon as they can.
percent of those aged 70 and over received bene­
The effect of changing economic conditions on
fits.1516 Experience under the Railroad Retirement retirement practices is illustrated by the experi­
Act indicates that the average age of railroad ence during the past two decades. During the
workers awarded full-age annuities in 1950 was depression of the 1930’s, 65 came to be accepted
67.7 years—almost 3 years above the age at which generally as the age at which retirement should
workers first became eligible for such benefits.16 take place. This concept was bolstered by the
Workers who voluntarily retire do not necessar­ establishment of the Social Security program,which
ily represent a complete loss of potential produc­ provided that benefits could begin at that age.
tive manpower. Some find other employment. During World War II, the need for all available
A survey by the Social Security Administration manpower resulted in a relaxation of compulsory
in 1951 of beneficiaries under the old-age and sur­ retirement practices and the encouragement of
vivors insurance program showed that 65 percent older workers to remain on their jobs. Although
of the men and 71 percent of the women beneficiar­ many of these workers left the labor force at the
ies considered themselves unable to work.17 Only end of hostilities, the present defense emergency
15 percent of the men and 11 percent of the women has again encouraged the older worker to remain on
beneficiaries reported they were able to work and the job past his normal retirement age and un­
wanted to work, but over half of this group desired doubtedly has contributed to a relaxation of
only part-time or occasional employment. An compulsory retirement practices.
Provisions for compulsory retirement, especially
analysis by the United Mine Workers of America
Welfare and Retirement Fund of the reasons for those which allow extensions beyond the specified
miners retiring showed that almost half of the compulsory age with the employer’s consent, will
recipients were disabled for further mine work, a not necessarily have to be altered to enable in­
third were laid off and could not find mine employ­ dustry to adapt its policies to changing manpower
ment, and only 1 of every 10 retired voluntarily.18 conditions. Probably, more important in deter­
In the New York State Department of Labor mining future actions with respect to compulsory
report cited above, administrators of the pension retirement provisions will be labor and manage­
funds studied reported that a majority of the pen­ ment attitudes on whether the retirement of
sioners under most of the plans had sought pensions workers is to be the right of management or the
choice of the worker. The gradually rising age
because of ill health.
The inclusion of automatic retirement provisions of the population and the increase in the span of
in only a small proportion of pension plans as working life suggest that, regardless of decisions
shown by this study, together with indications of concerning the application of compulsory provi­
relaxation in compulsory retirement rules and of sions, the age at which retirement takes place
decisions of individual workers to delay retirement may have to be continually reevaluated.
beyond the normal retirement age, seem to be
consistent with the present economic goal of Attitudes Toward Compulsory Retirement
utilizing all available manpower during the defense
Although full employment exerts an influence
15 Social Security Administration, Social Security Bulletin, Vol. 14, N o. 9,
September 1951.
against
the enforcement of compulsory retirement
18Railroad Retirement Board, Annual Report, 1951 (p. 10).
provisions, the concept of the right of management
17National Survey of Old-Age and Survivors Insurance Beneficiaries, 1951.
Social Security Administration, M ay 1952. (Fact Sheet 6; mimeographed.)
to retire a worker for reason of age alone is being
18Welfare and Retirement Fund: Four Year Summary and Review for the
challenged. Labor organizations are virtually
Year Ending June 30,1951. United M ine Workers of America (p. 11).



14

unanimous in their opposition to such compulsory
provisions. Some observers, interested in the
problem from the standpoint of the welfare of
older workers, or from the point of view of man­
power utilization, also oppose such provisions as
socially or economically unsound. Although
management generally favors the concept of com­
pulsory retirement, it varies the approach to its
application.
Differences of opinion on the problem of
compulsory retirement do not result primarily
from disputes of fact, such as the increased cost of
a pension plan with a mandatory provision or the
ease of administration of such a policy without
charges of discrimination. Instead, they indicate
a basic disagreement on the question of whether
retirement policy is an exclusive prerogative of
management or the right of the individual worker.
This disagreement may be indicative of different




concepts of the meaning and purpose of retirement
plans. Compulsory retirement appears to be
consistent with a concept that pensions reward
long and faithful service. They provide for the
regular retirement of superannuated employees
without discrimination and for the orderly replace­
ment of older workers with younger men. On the
other hand, compulsory provisions seem incom­
patible with a concept that pensions are the right
of the worker in that they constitute deferred com­
pensation to be received when the individual
desires to cease work, and are an adjunct to, rather
than a replacement of, seniority rights. Al­
though the first concept cannot be described as the
consensus of all management opinions and the
second as the attitude of all labor organizations,
the arguments advanced on the problem of com­
pulsory retirement by each group tend to reflect
these differences of opinion.

15

Part HI—Types of Benefits
to virtually every pension plan is a normal
retirement benefit to which the worker becomes
entitled, having otherwise qualified, upon reaching
the normal retirement age.19 In addition to the
normal benefit, many pension programs provide
for two other types of retirement payments which
are available under specified conditions prior to
the time workers can qualify for normal benefits.
These are usually termed early retirement and
total and permanent disability retirement.20 In
order to qualify for either type under most plans,
workers must have reached a specified age, or
completed a stipulated number of years of service,
or both.21
Every plan in this study22contained provisions
for normal benefits. About two-thirds of the
plans covering a slightly larger proportion of all
workers provided for disability benefits (chart 1).
Significantly, only 24 of the 300 plans provided for
normal retirement benefits only. Nearly a third
of the plans covering almost half the workers con­
tained provisions for all three benefits (table 1).
B a s ic

Participation

Participation in a pension plan does not always
occur automatically upon employment. A fairly
common requirement is that a worker be a regular,
full-time employee or on the seniority rolls. Such
requirements exclude from participation seasonal
workers and newly hired employees for specified
periods—often up to 3 months. Under contribu­
tory plans, the worker must, in most cases, choose
whether he desires to participate.
T a b l e 1.—

,

T y p e s o f retirem ent benefits p ro vid e d b y num ber
o f p la n s a n d w orkers 1952

,

[“X ” denotes benefits provided]
Types of retirement benefits
Normal
X
X
X
X
Total.

Early

Disability

X
X

X
X

Number of
plans
97
69
24
300
110

Workers
Number
(thousands)
2,691.3
660.2
1,587.0
918.8
5,857.3

M inim um Age and Service Requirem ents .

Percent
46.0
11.3
27.0
15.7
100.0

In addi­
tion to these requirements, some plans also spec­
ify that the worker must have attained a certain



age or have completed a specified period of serv­
ice, or both, in order to be eligible to participate
in the plan. Although preparticipation require­
ments have become less common under recently
established programs, over a fourth of the 300
plans, covering about 17 percent of the workers,
contained such provisions23 (table 2). Minimum
age and service requirements, where specified,
ranged from 25 to 35 years and 1 to 5 years,
respectively. Service only was the most preva­
lent type of requirement found in plans. When
combined with those plans specifying both service
and age, service requirements were found to exist
in 77 of the 84 programs with preparticipation
requirements.
M axim um Age Requirem ents . In addition to mini­
mum participation requirements, plans may speci­
fy an age beyond which the worker cannot become
a member of the plan, or be employed and still
qualify for normal benefits. Generally, this
maximum age was established by the stipulation
of a specific age (e. g., 45) or by the application of
the requirements to receive normal benefits.
Under the latter method, no age was specified;
however, by requiring that the worker must have
had a certain number of years of service in order
to receive benefits upon reaching normal retire­
ment age, and by providing that service could
not be accrued beyond the normal age or a specified
» Generally, this age is defined as the earliest age at which a worker, having
qualified for benefits, may retire at his own volition and receive the full
amount of monetary benefits to which his length of service or amount of earn­
ings, or both, entitles him under the normal retirement provisions of the plan.
Cash severance benefits or retirement separation pay and vested rights
are not included within the scope of this report. These are usually paid in
the form of a lump sum or, as in the case of vesting, represents rights accruing
to the individual prior to qualifying under the various benefit formulas of the
plan. For a discussion of these benefits see Part I.
« T o receive disability retirement benefits, usually the individual must also
have been totally disabled for a specified period of time, very often 6 months.
Most pension agreements are very specific with respect to the qualifications
for this benefit and spell out in detail the procedure to be followed in deter­
mining a worker’s original eligibility as well as his continued eligibility.
82This article is based on an analysis of 300 pension plans under collective
bargaining covering approximately 5,857,000 workers. Not all of these work­
ers were subject to collective bargaining agreements. While every plan was
under agreement, in many cases the plans were extended uniformly to cover
workers outside the scope of the contract. In every instance, the figure
represents the total number in all units to which the plan applies.
For the purpose of the study, plans under collective bargaining include:
(1) those established for the first time as a result of collective bargaining; and
(2) those originally established by either employer or union but since brought
within the scope of the agreement, at least to the extent of the agreement
establishing employer responsibility to continue or provide certain benefits.
All of the plans covered in the analysis were in effect in early fall of 1952.
« In order to be considered as having a service requirement for plan par­
ticipation or benefit eligibility for the purpose of this study, a program must
have required a period of 1 or more years.

16
Chart 1.—Types of Retirement Benefits Under Pension
Plans, 1952
Types of
Benefits 0
Provided:

80

PERCENT

100

NORMAL

participation age. Of these, 70 plans covering
upwards of 650,000 workers set a definite age and
the remaining contained benefit requirements
which operated to establish maximum ages in the
manner described above. Although the maximum
ages varied from 40 to 70 years, only slightly more
than one-fourth of the plans containing such pro­
visions set the limit for participation under age 55.
Requirements for Benefits

EARLY

DISABILITY
300
5 857,000

Net*: Based on a study ef
pension
plans under collective bargaining
covering approxim ately ,
w orkers.

later age, a maximum age was, in effect, estab­
lished. To illustrate: a plan required a minimum
of 15 years’ credited service in order for the worker
to become eligible for normal benefits at age 65.
In addition, it did not permit the accrual of service
beyond that age. As a result, age 50 became the
age beyond which a person could not be employed
or join the plan and still qualify for normal retire­
ment benefits. If there was, in addition, a pre­
participation service requirement, the maximum
age was further reduced.
More than half (163) of the plans, covering
about 40 percent of the workers, had a maximum
T able 2.—

M in im u m age a n d service requirem ents f o r p a r tic ip a tio n

Age requirements

All plans

None

Service requirements
Workers
Number (thousands)
Total.................................................
None..................................................
1 year.................................................
2 years...............................................
3 years_______________________
4 years_______________________
5 years...............................................

300
223
23
12
16
1
25

5,857.3
4,872.6
434.9
194.4
129.6
1.0
224.8

Age 25

Workers
(thousands)

Plans
259
216
18
6
11
1

7

* One plan provided an alternative requirement of 4 years’ service.




An almost universal requirement for normal re­
tirement benefits is the attainment of a specified
age. Another feature which has received con­
siderable emphasis under collectively bargained
programs is the requirement that workers have a
stipulated minimum amount of credited service in
order to qualify for normal benefits.
Similarly, the great majority of all pension plans
providing early retirement benefits specify the
attainment of a certain age in order to qualify.
Minimum service requirements to qualify for this
type of benefit are also found in many plans, such
requirements being very common under negotiated
plans.
Both age and service requirements are common
for disability retirement. The greater emphasis,
however, is placed on service; many recently bar­
gained programs specify the completion of a
minimum amount of service as the sole qualifica­
tion for this type of benefit. Under many plans,
the stipulated minimum credited service necessary
to qualify for benefits does not always provide an
accurate picture of the actual service or employ­
ment prerequisite to qualification for benefits
because a preparticipation period may also be re­
quired and not credited toward retirement benefits.

5,517.8
4,842.9
408.7
82.6
102.3
1.0
80.3

Age 30

Workers
(thousands)

Plans
11
1
1
2

3
>4

80.6
0.5
5.5
21.8
15.3
37.5

Age 35

Workers
(thousands)

Plans
18
3
3
2
2
8

188.3
12.9
13.4
63.5

Workers
(thousands)

Plans

1
2

70.6
16.3
7.3
26.5

6

20.5

12

13

12.0

86.5

* One plan provided an alternative requirement of age 35 with 1 year’s service.

17
N orm al Retirem ent. Although differences of opin­
ion exist as to just when a worker should be able to
retire, the present survey revealed that 65 con­
tinues to be the age specified for normal retirement
in the overwhelming proportion of plans (table 3).
Only 14 of the 300 plans analyzed provided for
normal retirement at ages other than 65. How­
ever, 11 plans, containing provisions for normal
retirement at age 60, accounted for one-fifth of all
workers in the study. A lower normal age for
women, usually 5 years earlier than for men,
prevailed in 30 plans.
In addition to age requirements, over 90 percent
of the plans also required the completion of a
minimum length of service in order to qualify
for normal retirement.24* These periods ranged
from 1 to 30 years; about half of these plans,
covering a slightly greater proportion of the
workers, required 15 years or more.
E arly Retirement. Although requirements for early
retirement varied widely among the 166 plans
containing these provisions, workers were usually
required to be at least age 55, to have been covered
by the plan for a substantial period of time, or to
fulfill both age and service requirements in order
to qualify (table 3). The attainment of age 55 or
60 was the most prevalent requirement found; a
majority of workers under early retirement pro­
visions were also required to complete 15 or more
years of service in order to qualify.
In contrast to normal retirement under which
the right to retire was at the option of the indi­
vidual, early retirement under many plans was
contingent upon the consent of the employer.
Over two-fifths of the plans providing for early
retirement, applying to more than one of every
four workers covered by this benefit, required
workers to obtain company approval in order to
retire early. Generally, those plans which called
for longer periods of service and higher age re­
quirements were less likely to condition retirement
upon the employer's consent.
u In the discussion on eligibility requirements, references to minimum
service requirements include both the plan membership and the prepartici­
pation period where applicable. In addition, the requirements are the
minima necessary merely to qualify for the particular type of benefit. In
the great majority of plans, fulfillment of these requirements would provide
only the minimum benefits. However, under those plans providing for a
flat benefit upon the attainment of a certain age and the completion of a speci­
fied amount of service, the amount provided would be both the minimum
and maximum under the plan. An example of this type of plan is that of the
United Mine Workers of America, which provides for $100 monthly upon the
completion of 20 years of service at age 60.




Although a number of plans
established in earlier years made provision for
retirement in case of total and permanent dis­
ability, greater emphasis has been placed on this
type of benefit by labor unions in their drive for
negotiated programs. Over two-thirds of the
plans in this study, covering nearly three-fourths
of the workers, made provision for this benefit
(table 3).
In comparison with the minimum requirements
necessary for early retirement benefits, a much
greater emphasis was placed on service as a sole
qualification for disability benefits. Relatively few
plans failed to specify some service requirements
for both disability and early benefits; however,
disability benefit requirements included age as
well as service in less than 35 percent of the 207
plans containing this benefit whereas this combi­
nation appeared in about 90 percent of the 166
plans providing for early retirement.26* The study
revealed that 15 or more years of service were
required to qualify for benefits under a significantly
larger proportion of disability provisions than
under early retirement provisions. Furthermore,
the age requirements for disability benefits were
generally lower than those for early retirement.
D isability Retirement.

Normal Retirement Benefits

The amount of the monthly pension to which a
worker is entitled upon retirement is determined by
the benefit formula provided in the plan.28 This
formula takes into consideration the employee's
earnings, his credited service under the plan, or
both. A feature which has received added em­
phasis under negotiated pension plans is the pro­
vision for guaranteed minimum benefits. Such
benefits are generally based on the completion of
specified periods of credited service.
B asie Benefit Formula. Although many variations

existed in the basic benefit formulas in the study,
the overwhelming majority could be classified under

*■ The number of pension plans which include a specific provision for retire­
ment in case of total and permanent disability does not necessarily reflect
the extent to which this practice actually exists. Under some plans which
do not have formal disability provisions, it is known that the early retire­
ment provisions are used for the purpose of granting retirement benefits to
disabled workers. Moreover, provisions for disability benefits exist outside
of some retirement plans.
*• The amount of benefit under some plans is discretionary with the com­
pany. No plans of this type are included in this study.

T

able

— Minimum age and service requirements for normalt early, and disability retirement benefits

3.

Age requirements 2
None

Minimum service
requirements 4

Age 45

Age 55

Age 50

Age 60

Age 65

Other

Workers
Workers
Workers
Workers
Workers
Workers
Workers
Workers
(thou- Plans (thou- Plans (thou- Plans (thou­ Plans (thou­ Plans (thou­ Plans (thou­ Plans (thou­
sands)
sands)
sands)
sands)
sands)
sands)
sands)
sands)
Normal retirement3

All plans..................
None
1 to 4.9 years_____
6 to 9.9 years_____
10 to 14.9 years
15 to 19.9 years
20 to 24.9 years........
25 to 29.9 years____
30 years and over__

11 1,203.3

300 5,857.3
25 346.0
43 702.1
30 244.0
57 1,105.2
99 1, 500.3
31 1,805.8
14 153.3
1
0.6

2
5.4
3
28.5
6 1,169.4

286 4,640.9
25 346.0
43 702.1
28 238.6
54 1,076.7
99 1,500.3
23 623.9
14 153.3

3

13.1

2
1

12.5
0.6

2
1

4.8
4.5

1

0.3

Early retirement i
All plans..................
None........................
1 to 4.9 years...........
5 to 9.9 years_____
10 to 14.9 years........
15 to 19.9 years........
20 to 24.9 years........
25 to 29.9 years........
30 years and over—

166 3,351.5
9
50.5
35 493.6
21 205.3
19 568.9
14 355.9
26 267.7
33 1,123.5
9 286.1

8

104.3

3
1
1
2
1

34.5
25.7
2.5
35.1
6.5

2
i
1

15.2

6

32.4

11.6
3.6

2
2
1
1

4."6
13.7
8.0
6.1

77 1,660.0
7
44.5
27 267.6
16 183.1
6 102.8
2
4.5
8 161.7
9 823.0
2
72.8

71 1,534.8
1
1.5
3 186.9
3
8.5
11 432.4
11 339.8
14
93.5
22 265.4
6 206.8

Disability retirement3
All plans..................
Nnne__ _
1 to 4.9 years_____
5 to 9.9 years...........
10 to 14.9 years........
15 to 19.9 years........
20 to 24.9 years........
25 to 29.9 years........
30 years and over—

207 4,278.3
5
50.3
9 123.8
56.6
8
23 197.6
119 3,373.9
28 378.3
14
96.0
1
1.8

135 2,708.4
45
50.3
7 121.3
5
35.4
20 136.7
80 2,204.0
9
95.3
9
65.4

4

69.7

1
2
1

0.7
67.7
1.3

19

739.5

33

441.4

13

312.2

1

2.0

2

5.1

1
1
14
3

1.8
11.0
714.6
12.1

1
2
1
20
4
4
1

0.7
10.2
2.8
379.5
17.1
29.3
1.8

1
1
11

57.4
1.6
253.2

1

2.0

1
1

4.5
0.6

1 For those plans which specified a period of employment to be served
before participation in the plan could begin, the service requirement in­
cludes both the preparticipation period and the required minimum plan
membership period.
3 In a few plans alternative age and service requirements were specified;
in each case, that with the lower age was selected.
3 Age requirements to qualify for benefits were lower for women than men

in a number of plans. Thirty plans, covering approximately 1,266,000
workers, specified a differential for normal retirement—5 years in all but 3
plans which stipulated 10 years; 17 of 18 plans, covering approximately
1,115,000 workers, specified a differential of 5 years for early retirement; 2
plans, covering 32,500 workers provided a 5-year differential for disability
retirement.
4 One of these plans specified “long service” as the only requirement.

three broad categories. The most prevalent type
was that in which the benefits varied with the
worker’s earnings and length of credited service
(table 4). Among the programs which used this
method were many of those negotiated in the basic
steel industry. These plans provided for a nor­
mal pension of 1 percent of average annual com­
pensation in the 10 years preceding retirement
multiplied by the years of credited service. From
the computed amount, the worker's primary Social
Security benefit was deducted.
The second most prevalent type of formula was
that in which benefits varied only with length of
credited service. Illustrative of this type were a
number of major programs in the automobile in­
dustry; the normal monthly benefit in these plans

was computed by multiplying a flat sum, for ex­
ample $1.50, by the number of years of credited
service (not exceeding 30). The resulting amount
was exclusive of the primary Social Security bene­
fit to which the worker was entitled. A variation
of this type of formula was the common provision
under which a flat amount (e. g., $100 or $125
monthly), including primary Social Security bene­
fits, was provided workers who completed a speci­
fied amount (25 or 30 years) of credited service.
For those with less service, the benefit was propor­
tionately reduced to a stipulated minimum (e. g.,
15 years).
Least prevalent of the three types were those
plans which provided a flat benefit to all workers
who completed a stipulated period of service upon




19
T a bl e 4.— Types of basic normal benefit formulas *by method

of financing

All plans
Type of benefit formula

Noncontribu­ Contributory
tory plans
plans

Workers Num­ Workers
Num­ Workers
(thou­ Num­
(thou­ ber (thou­
ber sands)
ber sands)
sands)

Total..................................... 300 5,857.3 225 4,592.0 75 1,265.3
=
=====
==
Benefits vary with work­
ers’ earnings and length
of credited service *......... 184 3,346.7 118 2,380.0 66
966.7
Benefits vary only with
workers’ length of cred­
3
ited service1..................... 75 1,121.7 72 1,108.0
13.7
Flat benefit provided to all
workers who fulfill speci­
fied service requirements. 39 1,300.9 33 1,016.0
6
284.9
Other..................................... 2
2
88.0
88.0
* These plans may specify a minimum service requirement to be fulfilled
before a worker is eligible for benefits.

reaching normal retirement age. Under this type
of formula, the fixed amount was both the mini­
mum and maximum. With two exceptions, all
programs of this type included in the study pro­
vided for a flat benefit exclusive of Social Security
payments. Many programs in the garment in­
dustry contained this type of normal benefit pro­
vision.

Nearly 85 percent of the 300
plans in the study guaranteed a minimum pension
to all workers upon the completion of a specified
period of service at normal retirement age. The
majority of these minima (about 60 percent) were
provided through a formula separate and distinct
from the basic normal benefit formula. Among
these plans were those in which the basic normal
benefit was geared to earnings and service while
the minimum guarantee was based on service only
and varied accordingly. Common examples of
this type were those plans which provided for a
normal yearly benefit, including Social Security, of
1 percent of average annual earnings times years of
credited service with a minimum guarantee of
$1,200 yearly, including Social Security, for a
worker with 25 years of credited service. This
guarantee was proportionately reduced for those
workers with less than 25 years’ service, down to a
minimum of 15 years. A variation of this type of
minimum was found in those plans in which the
normal formula was likewise based on earnings and
service, but the minimum guarantee was in the form
of a flat benefit which did not vary with the amount
of credited service. The remaining plans which
guaranteed minimum benefits did so under the
M inim um Benefits.




basic formulas which, in many cases, were similar
to the minimum formulas described above. In
short, if normal benefits were based on earnings
and service, the minimum guarantee, if provided
for, was generally based on service alone through
a separate formula. For those plans in which the
benefit was based on service alone, the overwhelm­
ing proportion of minimum guarantees were in­
herent in their basic formulas.
A djustm ent to Social Security Benefits. Following
the establishment of the Federal Social Security
program in 1935, many retirement plans were
revised or amended to take into account the pay­
ments which a worker was to receive under the
public program. In some cases, programs were
eliminated entirely, presumably for the reason
that retirement income was available through a
public program.
Generally, consideration of Social Security bene­
fits is reflected in the provisions of pension plans in
two ways. The benefit provisions, without direct
reference, may be designed to take into account
the amount of Social Security benefits which the
worker is expected to receive. On the other hand,
the benefit formula may specifically include all or a
part of the Social Security payment. (The latter
approach is generally referred to as the “off-set”
method of integrating or coordinating Social Se­
curity benefits under a private retirement plan.)
Many variations exist within these two general
approaches.
A considerable number of plans negotiated or
revised through collective bargaining contain
provisions in their benefit formulas for “off­
setting” Social Security payments. This feature
has certain consequences in light of the substantial
benefit increases which have been provided under
the Social Security program since the plans were
negotiated. Because total benefit levels were
fixed under many of these programs, the increase in
Social Security payments results in a decrease
in the amount of money to be paid from the private
plan.27
Other plans, while containing “off-set” provi­
sions, specify different techniques in applying the
* To illustrate: a plan provides for $100 monthly, including primary Social
Security benefits, upon retirement at age 65 with 25 years or more of service.
If the worker’s Social Security benefit amounts to $35, the plan will be
obligated to pay $65 in order to meet the guarantee. In such cases, the
effect of any increase in Social Security benefits is obvious.

20
feature. Under some programs only one-half the
Social Security benefit is included in the formula.
In this case, the worker benefits to that extent
from a rise in Social Security payments. Another
approach is to include only those Social Security
benefits in effect at the time the plan is established;
that is, all future changes are excluded in the
calculation of the plan benefits. A variation of
this type is found in those plans which include
T abl e 5.—Provisions for including primary Social Security

benefits in basic normal benefit formulas} by plans and
workers covered

Provision
Total..................................................................Social Security included___________________
Full benefit_____ ____________________
One-half benefit_______________________
Other___________________________ ____
Social Security excluded___________________

Plans
300
140
116
18
6
160

Workers
covered
(thousands)
5,857.3
2.871.6
1.762.6
967.6
141.4
2,985.7

only one-half of future Social Security benefit
increases in computing the benefit.
One hundred and forty of the plans in the study,
covering nearly 50 percent of the workers, included
all or a part of the worker’s Social Security pay­
ments in the calculation of the basic normal bene­
fit (table 5). More than 80 percent of these plans
specified that the full benefit was to be included.
With few exceptions, the remainder provided that
one-half the benefit was to be off-set. Further­
more, 92 of the 140 plans also contained minimum
benefit guarantees, virtually all of which made
provision for including the full Social Security
payment. Of the 160 plans which did not include
the Social Security benefits in the basic formula,
over one-fourth had minimum benefit guarantees
which included these payments.
Workers and their unions
are concerned with the amount of retirement
income, the relationship between retirement and
working income (and the resultant effect on stand­
ards of living),28 and how much the plan itself
actually provides exclusive of Social Security pay­
ments. Analysis29 of the 300 pension plans
revealed monthly retirement income ranging from
$77.50 (Social Security payments only) for a $3,000
a year man with 10 years’ service to over $250
monthly for workers earning $4,000 a year after
30 years’ service (table 6). In a majority of the

A m ounts o j Benefits.




plans under both the $3,000 and $4,000 earnings
classifications, workers with 10 years’ service upon
retirement received no benefit from the private
plan, their only income being their Social Security
benefit. In part, this was attributable to the
fact that a majority of the plans required the
worker to have more than 10 years of service in
order to qualify for retirement benefits. On the
other hand, plans rarely provided less than $100
monthly to workers with 30 years’ service (charts
2 and 3). This reflects, in part, the impact of the
many negotiated plans that provided $100 to $125
(including Social Security) upon the completion of
25 or more years’ service. Furthermore, the study
revealed that for the assumed earnings level of
$3,000, approximately 40 percent of all plans pro­
vided more than $125 monthly to workers having
30 years of service; a majority of these provided
$150 monthly or more. For a worker with the
same amount of service and average earnings of
$4,000 the proportion which paid more than $125
increased to 57 percent, nearly half of which
provided $175 or more.
The average normal benefit,30 including primary
Social Security, provided workers with 10 years of
service and earnings of $3,000, amounted to $77.50
or 31 percent of their yearly income prior to retire­
ment (table 7). In other words, only the Social
Security benefit was available to such workers.
For workers with 30 years of service, this percent­
age increased to 47. Employees with the same
periods of service, but earning $4,000, received
smaller proportions of their yearly income, largely
because of a combination of the following factors:
a greater percentage increase in the amounts of
the selected earnings levels (33 percent) than in
the amounts of Social Security benefits (10 per­
cent) provided for these levels; the determina­
28 In all computations throughout this study, the current maximum pri­
mary Social Security benefits have been used. They are $77.50 and $85
monthly for workers with average incomes of $3,000 and $3,600 (or more),
respectively. The wife of a man receiving Social Security benefits is entitled
to one-half his primary payment providing she is at least age 65.
29 In order to provide data illustrative of the benefits provided under pen­
sion plans, the normal benefits under all programs were computed on the
basis of selected levels of earnings and lengths of credited service. Chosen
for this purpose were service periods of 10, 20, and 30 years and earnings
levels of $3,000 and $4,000 annually. With respect to the latter, it was
assumed that earnings levels were c o n s ta n t throughout the period of credited
service under the plan. Furthermore, in computing the total monthly
pension amount to which the worker was entitled, the primary Social Secu­
rity benefit was included in all cases so as properly to compare those plans
which included or excluded this benefit in their formula.
88 Average retirement benefits are unweighted median levels of the 300
plans in each earnings and service category.

21
Chart 2.—Amounts of Normal Monthly Retirement
Benefits Under Pension Plans for $3,000 a Year
and 30 Years* Service, 1952

tion of the retirement benefit solely on the basis of
service under many plans (thus, an increase in
earnings did not increase the benefit); and the
maximum limits placed on the amount of service
which could be used in computing the benefit, i. e.,
many plans provided maximum benefits upon com­
pletion of 20 to 25 years of service.
For all selected earnings and service classifi­
cations, the average retirement benefit provided
under contributory plans exceeded those provided
under noncontributory plans. In most cases,
this difference was fairly significant. For example,
the average benefit provided under contributory
plans to workers with 30 years of service and
$4,000 earnings amounted to nearly 60 percent
of their preretirement earnings, whereas under
noncontributory plans this figure was 36 percent.
In view of the widespread practice of “off-set­
ting” Social Security benefits in the plan formula,
a question is often posed concerning the proportion
of the worker’s total retirement income accounted
for by the private plan. These proportions under
selected earnings and service categories are shown
in table 8. Although actual plan payments ranged
from zero to as high as 70 percent of the total in­
come to which the worker was entitled upon retire­
ment, the majority of plans under all earnings and
service categories did not pay in excess of 40 per­
cent of his total benefit; rarely did they pay in
excess of 60 percent of the total benefit. Signifi­
cant differences existed between the proportions

N o t e — Based

on a study of 300 pension plans under collective bargaining
covering approximately 5,857,000 workers. Benefit amounts are based on
future service formulas, assuming a constant level of earnings and including
monthly primary Social Security benefits of $77.50 for workers earning
$3,000 a year.

paid by contributory and noncontributory plans,
particularly with respect to benefits based on 20
or more years of service for both the $3,000 and
$4,000 earnings levels. Whereas less than 10
percent of the 225 noncontributory plans (based
on 20 years’ service and $3,000 earnings level) pro­
vided 40 percent or more of the total benefit, up-

T able 6.— Amount of normal retirement benefits, including primary Social Security, for selected levels of earnings and years

of credited service

1

$3,000 per year earnings
Amounts of monthly
benefits

With 10 years’
service

With 20 years*
service

$4,000 per year earnings
With 30 years’
service

With 10 years’
service

With 20 years’
service

With 30 years’
service

Workers Plans Workers Plans Workers Plans Workers Plans Workers Plans Workers
Plans (thousands)
(thousands)
(thousands)
(thousands)
(thousands)
(thousands)
Total........................................... 300
$77 50 to $79.99 ........................ >179
11
$80.00 to $89.99..........................
45
$90.00 to $99.99...........................
50
$100.00 to $109.99........................
9
$110.00 to $119.99.......................
5
$120.00 to $129.99........................
$130.00 to $139.99........................
$140.00 to $149.99.......................
1
$150.00 to $174.99........................
$175 00 to $199.99 __________
$200 00 to $224 99
____
$225 00 to $249.99 ________
$250 00 and over _ ______

5,857.3
3,985.2
102.4
1,123.7
446.1
165.7
24.2
10.0

300
>27
89
21
41
41
52
6
12
6
4
1

5.857.3
196.7
1, 536. 5
325.6
1.571.3
475.9
855.9
86.4
243.7
80.9
483.3
1.1

1 Benefit amounts are based on future service formulas, assuming a constant level of earnings and monthly primary Social Security benefits of $77.50
and $85.00 for workers earning $3,000 and $4,000 per year, respectively.
* Under all of these plans, the only benefit to which the worker was en­
titled was his primary Social Security benefit.



300
—

1
2
102
47
44
24
11
53
13
2

5,857.3
2lT
q1.9o
1,556! 3
1,088.1
1,440. 7
420.5
194.8
465.8
666.4
17.1

300

5,857.3

300

5,857.3

300

5,857.3

>179
15
24
28
34
16
3
1

3,985.2
116.6
712.9
279.7
500.5
215.6
36.8
10.0

>101
11
25
36
18
23
14
52
18
2

1.473.2
96.9
1.075.2
913.1
74.1
642.4
213.3
647.5
715.6
6.0

1
89
21
21
38
22
26
44
26
10
2

1.9
1.381.6
245.2
154.9
1.236.7
953.7
429.5
972.2
269.6
176.4
35.6

*Under all but 3 of these plans, the only benefit to which the worker was
entitled was his primary Social Security benefit,

22

Chart 3.—Amounts of Normal Monthly Retirement to work until normal age. Primarily, two factors
Benefits Under Pension Plans for $4,000 a Year account for this: first, he would have fewer years
and 30 Years* Service, 1952
in which to accumulate credit under the plan and,

Note—Based on a study of 300 pension plans under collective bargaining
covering approximately 5,857,000 workers. Benefit amounts are based on
future service formulas, assuming a constant level of earnings and including
monthly primary Social Security benefits of $85.00 for workers earning
$4,000 a year.

wards of 25 percent of the contributory plans did
so. Comparable figures for benefits based on 30
years of service and $4,000 earnings were approxi­
mately 26 and 90 percent, respectively.
Early Retirement Benefits

Generally, the benefit provided a worker under
the early retirement provisions of a plan is smaller
than that which he would receive if he continued

secondly, on the average, a worker retiring early
would draw his pension for a longer period of time.
In the overwhelming proportion of plans in the
study which contained early retirement provisions,
the basic normal formulas were used to compute
the early retirement benefits. These benefits,
in the great majority of cases, were then reduced
to take into account the longer period of time over
which they were to be paid. For example, under
its normal formula a plan provided for a monthly
amount equal to $1.50 multiplied by years of
credited service, exclusive of Social Security bene­
fits. For a worker who retired prior to age 65,
this benefit was reduced by one-half of 1 per­
cent for each month by which he was younger than
that age. Under this plan, a worker who retired
at age 60 with 30 years of service received $45.00
less 30 percent, or $31.50.
In another method used when the normal for­
mula included Social Security benefits, the esti­
mated Social Security payment to which the
worker would be entitled upon reaching age 65
was deducted from the computed benefit. The
resulting amount was then reduced by one-half of
1 percent for each month by which the worker
was under age 65 at date of early retirement.
The early retirement provisions of some plans
contained an optional method of computing the
benefit under which the amount of monthly retire­
ment income a worker received before and after
age 65 was equalized. This method involved the

T a bl e 7.—Average normal retirement benefits expressed as percentage of selected earnings level1

All plans
Selected earnings and service
categories

$3,000 yearly with—
10 years’ service_________
20 years’ service_________
30 years* service_________
$4,000 yearly with—
10 years* service..................
20 years’ service _ ___
30 years’ service.................

Excluding Social
Security

Noncontributory plans

Including Social
Security

Excluding Social
Security

Including Social
Security

Excluding Social
Security

Including Social
Security

Percent
Percent
Percent
Percent
Percent
Percent
Monthly
of Monthly
of Monthly
of Monthly of Monthly
of Monthly
of
amount earnings amount earnings amount earnings amount earnings amount earnings amount earnings
level
level
level
level
level
level
$27.00
40.00

10.8
16.0

30.00
48.76

9.0
14.6

$77.50
104. 50
117.50
85.00
115.00
136. 76

31.0
41.8
47.0
25.5
34.5
40.1

* Based on a study of 300 pension plans under collective bargaining covering approximately 5,857,000 workers. Benefit amounts are based on future
service formulas, assuming a constant level of earnings and monthly primary



Contributory plans

$12.50
35.00

5.0
14.0

15.00
35.00

4.5
10.5

$77. 50
90.00
112.50
85.00
100.00
120.00

31.0
36.0
45.0
25.5
30.0
36.0

$25.00
50.00
75.00
36.70
73.40
110.10

10.0 $102.50
20.0 127.50
30.0 152.50
11.0 121.70
22.0 158.40
33.0 195.10

41.0
51.0
61.0
36.5
47.5
58.5

Social Security benefits of $77.50 and $85.00 for workers earning $3,000 and
$4,000 per year, respectively. Averages are unweighted median levels of
the plans in each earnings and service category.

23
granting of a larger pension up to age 65 than was
actually due the employee under the regular
formula. Upon reaching that age, the benefit
was reduced so that when combined with the
T a b l e 8.— Distribution of plans by percentage of total

monthly benefit (including primary Social Security) paid
by the plan for selected earnings and service categories, by
method of financing 1

Number of plans paying percentage of total
benefit (including primary Social Security)
Selected earnings and service
Oto
categories *
9.9
per­
cent

10 to
19.9
per­
cent

20 to
29.9
per­
cent

30 to
39.9
per­
cent

40 to
49.9
per­
cent

50 to
59.9
per­
cent

60 to
69.9
per­
cent

All plans (300)
$3,000 yearly with—
10 years’ service.
20 years' service.
30 years’ service.
$4,000 yearly with—
10 years’ service.
20 years’ service.
30 years’ service.

180
105
2
186
102
1

44
27
32
24
89

57
45
105
37
52
30

18
90
90
41
38
54

25
68
3
60
37

1
7
31
1
23
73

1
4
1
16

Noncontributory plans (225)
$3,000 yearly with—
10 years’ service.
20 years’ service.
30 years’ service.
$4,000 yearly with—
10 years’ service.
20 years’ service.
30 years’ service.

171
102
2
177
100
1

31
26
28
21
88

15
38
103
13
49
28

7
46
80
6
29
49

7
28
17
30

1
5
10
1
8
27

1
2
1
2

Contributory plans (75)
$3,000 yearly with—
10 years' service.
20 years’ service.
30 years’ service.
$4,000 yearly with—
10 years* service.
20 years* service.
30 years’ service.

9
3

13
1

9
2

4
3
1

42
7
2
24
3
2

11
44
10
35
9
5

18
40
3
43
7

2
21

2

15
46

14

approximately 5,857,000 workers. Total benefit amounts are based on future
service formulas, assuming a constant level of earnings and monthly primary
Social Security benefits of $77.50 and $85.00 for workers earning $3,000 and
$4,000 per year, respectively.




worker’s Social Security payment, the tota
amount was equal to that received prior to age 65.
Disability Retirement Benefits

A wide variety of formulas were used to deter­
mine the disability benefits under plans in the
study. Similar to early retirement provisions, a
considerable number of plans based the benefit on
the normal benefit formula. A far greater pro­
portion, however, utilized other approaches to
determine the benefit.
The amounts of disability benefits were generally
more liberal than those under the early retirement
provisions. In part, this was a recognition of the
fact that the worker was being forced to retire for
reasons beyond his control. Whereas in early
retirement provisions the estimated Social Security
payment often was included in the benefit com­
putation, under the disability provisionsa common
practice was to establish a minimum or flat
benefit exclusive of Social Security payments.
Due largely to the inclusion of Social Security
benefits in the normal benefit formula, these flat
or minimum disability pensions often were greater
than the amounts paid by the plan under the
normal retirement provisions. Upon reaching age
65, the flat or minimum disability benefits were
either continued in the same amount or the
worker’s benefit was recomputed according to the
normal formula. In some plans, the disability
benefit was the same as that for normal retire­
ment, but payment was deferred until the worker
reached normal retirement age. This simply
relieved the employee of the requirement that he
work until normal retirement age in order to be
eligible for benefits.

U. S. GOVERNMENT PRINTING OFFICE: 1953