Thursday, July 31, 2008

Commentary: Proposals to Change U.S. Benefits Laws to Account for Worker Longevity Increases

John Turner, coeditor of "Work Options for Older Americans", has written an article on "Work Options for Older Americans: Employee Benefits for the Era of Living Longer" published in the Third Quarter 2008 issue of Benefits Quarterly. According to Turner, "[m]any of our social policies and employee benefit policies were designed for an era when people had shorter life expectancy," so that "[w]ith the demographic changes occurring, it is time to reexamine those policies to fit the realities of the new demographic era of living longer."
Public policy should provide older people with more choices, rather than fewer. Work effort by the elderly that is all "push" (due to financial need) and no "pull" (due to attractive jobs) is not socially acceptable. Thus, an increase in labor force participation by the elderly that is motivated mainly by a drop in their reservation wages (the minimum wage at which they are willing to work) because of decreases in pension income would not be an acceptable development. Much more acceptable is the idea that workers who may have to supplement their pensions are also induced to work because of attractive wages, employee benefits, flexible work hours or the nonpecuniary aspects of work. Some of the attractive nonpecuniary aspects of work for older people include socialization, structure to the day and self-esteem. Others include shorter hours, greater vacations and greater flexibility in work schedules.
Among other things, Turner suggests that, since it is difficult for workers to collect a pension while phasing out work, the government could take a proactive stance towards flexible employment and provide guidance to employers, who are chary of experimenting under threat of losing their tax deductions. Another suggestion, reflective of increased longevity, to help encourage defined benefit plans, is to allow employers to index initial benefits received at retirement to increases in life expectancy.

Source: Benefits Quarterly "Work Options for Older Americans: Employee Benefits for the Era of Living Longer" (July 31, 2008)

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