More workers can look forward to corporate coverage

In the future, more Americans will be able to look forward to a corporate pension in retirement. And these pensions, combined with social security, may replace the major part of the income workers pocketed before retirement.

Those are the bullish key conclusions of a recent study sponsored by the American Council of Life Insurance, an industry trade group. The study focused on the pension prospects of two groups: those who were aged 40 to 44 in 1979 and those who were 50 to 54.

The study's conclusions should be viewed with caution, because the results are extrapolations based on a 1979 Bureau of the Census survey. And the report assumes no changes in current social security law, despite the fact that changes are likely to be made in the system when Congress reconvenes next year.

Still, the study's authors contend that their findings ''provide a reasonable baseline for examining the general trends (in pension plan coverage and benefits) and the impact of alternative policies.''

One of the study's key findings was the fact that the percentage of workers currently covered by pension plans understates the likelihood of receiving benefits.

''The study shows that while only about half of American workers now have some kind of pension coverage, about 7 out of 10 in the 40-to-44 age bracket will be getting pension benefits by the time they retire,'' says G. David Hurd, chairman of the industry study group and vice-president of Bankers Life Company of Des Moines.

The pension benefits the group collects will include checks from defined benefit and defined contribution plans, Keogh plans, and individual retirement accounts.

Workers who are currently not covered by a pension plan may receive benefits for a number of reasons. They may eventually work for a company that has a plan; their current employer may adopt a plan; they may have an IRA or establish one; they may receive vested benefits from a previous job; or they may collect survivor benefits from a deceased spouse's pension.

Most of the individuals not receiving a pension will have spent little or no time in the work force. For those individuals in the 40-to-44 age group in 1979, over 90 percent of those who are not expected to collect a pension will have worked less than 10 years after 1979. About 23 percent of the people in this group who don't receive benefits of their own will be married to someone who does receive them.

If pension coverage is looked at on a family basis, the picture is even brighter. Benefit collection prospects for families exceed those for individual workers and should grow rapidly because of the influx of women into the labor force. Assuming no increase in the portion of Americans covered by pensions, by the year 2004 about 85 percent of all married couples can expect pension benefits from at least one spouse's covered employment. By contrast, 66 percent of the retirement-age single individuals in 2004 will be covered.

Just because more individuals will have pension coverage does not mean average pension benefits will rise. Most of the increase in the percentage of covered workers comes from employees with low earnings and from spouses of deceased workers getting survivor benefits. These groups generally have lower benefits than current pensioners.

Offseting the trend to smaller than average benefits is the fact that inflation-adjusted wages are expected to increase, pushing up pension benfits. And increases in the years of covered service will push up pension payments, since many plans link the benefit to the number of years worked.

As a result of these offsetting factors, family pension benefits in the period from 1979 to 2000 will decline slightly, after adjustment for inflation. The study found that families with members aged 40 to 44 in 1979 will receive average benefits of almost $5,000 a year in 1981 dollars. In 1979, the average retiree received benefits of $5,400 in 1981 dollars.

Despite the growing importance of employer pensions, social security will still provide more than half of the retirement income for a majority of families. For both married and unmarried individuals who were aged 40 to 44 in 1979, social security will provide over 60 percent of total retirement benefits.

Social security will play an even bigger role in the retirement incomes of families with preretirement incomes up to $15,000 a year in 1981 dollars. For that group, social security will account for 80 percent of total retirement benefits. This reflects the progressive benefit structure of social security. Even workers with preretirement incomes over $30,000 will get more than half their retirement benefits from social security.

That portion of preretirement income which pensions and social security replace will depend on a family's income level.

For all families with members aged 40 to 44 in 1979, the median replacement rate is 76 percent of preretirement income. Some 65 percent of the replacement comes from social security. Social security and private pensions will replace an average of over 100 percent of after-tax preretirement income for families that earned less than $5,000 in 1981. Families in the $20,000-to-$25,000 income category will have 76 percent of their income replaced. Families with incomes of

Although in the future the retirement income picture will brighten for many, the study cautions that ''problems remain for families without substantial work force experience by at least one family member.''