Women's greater longevity raises equality issue

In 1978 the Los Angeles Water and Power Department was accused of discrimination for extracting higher pension payments from female employees than from males.

The Los Angeles utility's justication: Female employees outlive their male counterparts by an average of five years. This means the company pays five extra years of security to retired female employees. So the department decided women should pay 15 percent more toward their pension fund.

In ruling against the utility, the US Supreme Court said that an individual's life expectancy is based on numerous factors. Therefore, longevity cannot be based on gender alone, and employers are obliged to pay equal benefits for equal work regardless of mortality figures based on sex.

Cases like this (known as the Manhart Decision), involving an accusation of sexual discrimination, bring a swell of controversy, emotion and ethical questions.

It is fair to require males to "subsidize" the pension funds of females, who tend to live longer and therefore collect more benefits? Is it fair for women to receive lower monthly pension payments than men because their benefits have to be stretched out over a longer period of time? If pension policies cannot have differences based on sex, can different standards apply for age, health, or family history?

There are so many factors involved in legislating such a sensitive issue that some group somewhere will ultimately object, say Richard Healy and Linda Kistler , writing in the current issue of The Employee Benefits Journal. Yet the equal-standards law upheld in the Manhart case -- everyone who pays in the same amount receives the same amount -- is not fair either, they maintain.

The most important aspect of the legal ruling resulting from Manhart is the payment of pensions or annuity funds after retirement.

Any annuity or pension scheme is based on mortality tables assuming an average life for beneficiaries after retirement. If the individual lives for fewer years than this average, some of the money invested to provide his or her pension will support payments to those who live longer than the average. The amount of money put into the pension fund is planned actuarially to balance out. If pension payments are equal to both sexes, since women live longer than men on average, females benefit from the pension contributions for the shorter-lived average man. If a company has provided a pension that differentiates between men and women on the basis of average mortality by paying women smaller pensions , the court ruling raises the danger of legal suits on behalf of women. And if they lose the suits, the cost of a settlement could be large to the corporation or insurance company behind the pension plan.

By guaranteeing women the same amount of money as men, Mr. Healy and Ms. Kistler explain, the men are being cheated out of the extra money being paid to women who live longer.

"It's a big, confusing can of worms," Mr. Healy says.

Before the Supreme Court decision, many employers annuity funds had been solving the apparent inequities by paying women a lower monthly fee than the men , who have contributed the same amount of money and who are retiring at the same age. But the Manhart decision as well as decisions from two other cases sited in Mr. Healy and Ms. Kistler's study, made this practice illegal. These two cases, called Henderson and Robertson, also note the tendency of women to outlive men as their defense."Women outlive men . . . reduced payments to women would provide a comparable income to both classes in an overall analysis."

While women, as a class have a longer life expectancy, Mr. Healy continues, "there are hundreds of reasons that certain individual women won't live longer. And reasons why some men . . . reduced payments to women would call it the what-if-you're-hit-by-a-truck factor. This system is not fair to them."

This arrangement would be fair actuarially, he says. But in reality women are being forced into a lower standard of living. Employers and annuity funds are forcing women to subsist on meager incomes to receive what is actuarially their fair share.

So the Supreme Court has ruled against this.

However, many annuities and companies had already set up their systems with differentiated payments. One such organization, Teacher's insurance Annuity Association and the College Retirement Equities Fund, or TIAA-CREF, is wrestling with this problem.

William Slater, senior vice-president of TIAA-CREF, the organization that provides pension and annuity programs for college and educational association staff, operated under the differentiated mortality tables until last December. Then they adopted a "merged gender" mortality table. This is a combination of male-female longevity figures averaged together.

The Equal Employment Opportunity Commission has ruled that the use of this table is not in violation of the Civil Rights Act or equal-pay laws. However, the EEOC has decided to pursue TIAA-CREF, through litigation, for its past use of differentiated tables.

In other words, say Mr. Slater, "the EEOC is trying to have us pay what we owe retroactively. They want us to make up to the pensioners the money they lost -- or gained -- based on the former differentiated tables."

Mr. Slater describes TIAA-CREF's position as "floundering."

Although TIAA-CREF is only one case, Mr. Healy and Ms. Kistler expect similar cases to come up soon. As to solutions, Mr. Healy sees one clear alternative: "Upon retirement, employers could offer all the collected pension money in one lump sum. Thus men and women in similar situations would receive the same amount. It would be up to them to establish their own annuity, or individual retirement account, or Keogh. As I see it, this is the only way to eliminate the possibility of lawsuits."