The Impact on Women of Proposed Changes in the Private Pension System: A Simulation

This study estimates the effects on pension benefits received by women that would result from some of the changes recommended in 1981 by the President's Commission on Pension Policy. The private pension system now presents several barriers to the attainment of benefits by women: (1) the low level of coverage in many industries with a high proportion of women employees; (2) the requirement of many years of service with the same employer before benefits can be received; (3) the offsetting of private benefits by some portion of social security benefits; (4) the frequent exclusion of individuals under age 25 with less than one year of service; and (5) the frequent exclusion of part-time workers. To test the effects of these barriers, this study first links two simulation models to generate data estimating the private retirement benefits of a cohort of women who were aged 25 to 27 in 1960. Those benchmark estimates are then compared with the benefits predicted in five change models, each of which removes one of the five barriers to benefit attainment. Significant differences are found between benefits under the benchmark model and those under the three models testing changes in coverage, vesting, and integration. No significant effects result from the assumed removal of the last two barriers.