Trends in retirement eligibility and pension benefits, 1974-83
Reduced age requirements for retirement and improved pension payments emerged as major changes between 1974 and 1983 in a sample of pension plans analyzed by the Bureau of Labor Statistics. A group of 187 pension plans either fully or partially paid for by employers was studied. The plans covered approximately 6.7 million workers in 1982, and were mainly those of large employers.1 Eighty-seven percent of the pension plans studied covered 5,000 workers or more in 1982, with 33 percent covering at least 25,000 workers.
The plans were all those common to two BLS sample surveys: (1) a 1974 survey of pension plans whose provisions were filed with the U.S. Department of Labor under the terms of the Welfare and Pension Plan Disclosure Act of 1958, as amended; and (2) the 1983 Employee Benefits Survey of medium and large firms.2 Although the plans in this analysis are not a representative sample of all pension plans, they do cover a large number of union and nonunion workers and illustrate the changing provisions for retirement during the 1974-83 period.
Age and service requirements
Pension plans typically require employees to have attained a certain age, a certain number of years of service, or both, to qualify for retirement benefits. Or, they may specify that the sum of the employee's age and years of service equal a certain number, such as 85. Pension plans often specify more than one requirement; that is, they have "alternative requirements.' In such cases, this analysis uses the requirement allowing retirement at the earliest age.
Normal retirement. Over the period studied, many of the plans lowered their age requirements to permit normal retirement prior to age 65. In 1974, 103 of the 187 plans provided for such benefits and by 1983, the number rose to 149. (See table 1.) Increased length-of-service requirements, however, typically accompanied the lowered retirement age. In 1974, 59 plans had no service requirement, whereas 30 plans required 30 years of service. By 1983, the pattern was reversed: 40 plans had no service requirement, while 50 required 30 years of service.
Where an age 65 requirement was eliminated from a plan, the new age was usually 62 or less. The following tabulation summarizes the changes in age and service requirements, using age 62 as a point of reference:
In 1983, most of the 148 plans allowing normal retirement at age 62 or earlier fell broadly into two groups; those permitting retirement at 55 with no more than 30 years' service (55 plans) or those requiring age 60 or 62 (83 plans). The largest growth between 1974 and 1983 occurred in the first group--rising from 29 to 55 plans, or from 16 to 29 percent of the plans studied.3
Alternative requirements. In many instances, plans reduced the normal retirement age to what previously had been an early retirement age. But, as noted above, more years of service were required at these younger ages. At the same time, the plans retained the prior requirements--such as age 65 and no stipulated years of service--as alternatives. This protected older employees with short service.
A total of 131 plans had alternative age and service requirements in 1983, a 54-percent increase from 1974. Usually, age 65 was the alternative retirement age in plans with normal benefits at age 62; retirement by age 62 or 65 was often an alternative in plans with normal benefits prior to age 62. Most plans did not specify any length-of-service requirements for retirement at age 65, but retirement at age 62 typically required 10 to 15 years' service.
Early retirement. Nearly all the plans in 1974 and 1983 permitted retirement before the normal retirement age, but with a reduction in benefits. However, as table 2 indicates, many plans revised the age and service requirements for early retirement during …