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![handle is hein.tera/tafoutaxt0031 and id is 1 raw text is: Tax Review
JANUARY,1967
Vol. XXVIII, No. 1
The Future of Pension Plans-
An Employer's Viewpoint
By R. H. HUBBARD, JR.
The future of private pension plans is bright.
They are making, and will continue to make, an
ever-increasing major contribution to the retirement
and economic security for many, and we would
hope shortly for most Americans.
Private pension funds are, and will increasingly
become, one of the single most important sources
of new capital that will be needed to sustain the
continued growth and expansion of our economy.
Let me demonstrate briefly these points.
While many employers have had private pension
plans for years-General Electric's Pension Plan
dates back to 1912-the growth of pension plans
has leap-frogged in recent years. Only 3.7 million
people were under private pension programs in
1940. Today, the number is over 25 million. If we
include dependents who are also directly affected
by private pension plans, this number jumps to
probably 80-90 million Americans.
By 1980, a conscrvative estimate shows 43 mil-
lion people covered, plus dependents who are also
involved. Today, about 2.5 million individuals are
receiving annually almost $3.0 billion in pension
benefits. These conservative estimates indicate that
by 1980 about 7 million people will be receiving
over $11.0 billion a year.
While we all can appreciate the value of private
plans to individuals in terms of retirement, dis-
ability or survivor's income, we may need to be
reminded as to the vital role that pension plans
serve in stabilizing the economy-in providing new
capital for future growth. Today, there is over $85.4
billion invested in pension funds in the American
economy. These are working-not sterile-funds that
are, and will continue to be needed to finance the
growth of business and industry. By 1980, this
source of capital will increase to over $200 billion.
Now, before you relax too much in the face of
today's accomplishments and what vould seem to
be a bright future ahead-let me point out that the
storm signals are up. There is white water ahead.
Some of the difficulty seems to result from a fail-
ure to understand how the private pension plan
system operates. Some results from a gross miscal-
culation as to the need for and the results from a
whole new mountain of proposed rules and regula-
This Issue in Brief
While the future of private pension plans
seem bright, says Mr. Hubbard, storm sig-
nals are up, mainly in the shape of pro-
posed added Federal regulations. Among
these he counts: (1) the concept of a Fed-
eral fiduciary responsibility in the plans' op-
eration; (2) compulsory vesting and porta-
bility of credits through a Social Security
transfer fund; (3) mandatory funding and re-
insurance proposals; (4) plans to change
the rules for integrating private pension plans
with Social Security.
The introduction of general [government]
revenue financing of Social Security, he also
points out, could wash out all our soundly-
conceived private pension planning . . . we
hope that . . . we don't end up putting all our
retirement eggs in one inflexible government
basket.
Copyright 1967 by Tax Foundation, Inc., 50 Rockefeller Plaza, New York, N.Y. 10020, Judson 2-0880
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