Sweeping pension reform proposed by panel

Broad pension proposals -- tentatively set by the President's Commission on Pension Policy and still needing approval by Congress -- could substantially shift low Americans prepare for their "golden years."

In its research, the White House panel took into consideration findings that show:

1. The percentage of the US population over 65 will jump from 11 to 22 percent in the next 50 years, squeezing younger workers' paychecks.

2. A majority of working Americans today believe they probably will not have adequate income in retirement.

The White House group, which met in Boston May 4, made several choices on new directions for its study, expected to end in final recommendations next February. Among interim proposals under consideration:

* Base retirement age, now set as early as 62 for social security benefits and at 70 at most private employers, on a formula that would entitle all Americans to spend onequarter of their adult lives in retirement, calculated according to the nation's average life expectancy.

That presently works out to a retirement age of around 67 or 68, says C. Peter McColough, the commission head and chairman of Xerox Corporation.

* Assure every working American a minimum retirement income from employers, with limited ability to transfer pension "credits" to a new employer and with fewer working years needed for eligibility.

* Tax US social security benefits but do not require retirees to lose their benefits if they received pay for work in later life. (A commission survey found that presently 34 percent of Americans retire at 62 or before, while 47.5 percent of working Americans expect to do the same.)

* Provide strong tax incentives to low- and moderate- income Americans to save as much as 20 to 25 percent of their yearly income for retirement.

* If costs are not prohibitive, gaurantee working Americans an "adequate" retirement income based on several years of their highest incomes and paid for by some combination of three sources: government, employer, and individual savings.

* Provide one pension system for new employees in federal, state, and local government jobs.

* Entitle a spouse to receive at least some inheritance of a deceased spouse's pensions, based on the assumption that marriage is a partnership.

Commission members express concern that too many Americans -- almost 60 percent -- expect to rely primarily on social security for retirement income. "We are creating a two-class society," Mr. McColough warns -- those with private pensions and those without. The panel believes serious consideration should be given to a "universal, advance-funded" pension program that would be required of all employers. A central clearinghouse would allow "portability" of pensions between employers.

Most of these interim proposals, commission members said, may not be adequate in an inflatinary economy. "If this nation is going to have double-digit inflation, it is a very serious question whether we can look after our reitred people," Mr. McColough said.