Pension law is no windfall, but will reduce discrimination

By , Staff writer of The Christian Science Monitor

The pension reform bill Congress passed last week and sent to the President is designed to reduce discrimination in pension administration, thus making it easier for women to earn corporate retirement benefits.

Politicians from both parties are hailing the Retirement Equity Act of 1984, which they expect will attract votes from women. President Reagan has said he will sign the measure.

''This is a great day for American women and a great day for every American who is looking to provide old-age security for him or herself and their family, '' said Rep. Geraldine Ferraro, who sponsored the House bill. She introduced similar legislation in the House four years ago.

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Sen. Robert Dole (R) of Kansas, a key Senate supporter, said the measure ''alters certain rules that have in some cases allowed pension plans to ignore the changing needs of women and others in the work force.''

But pension experts caution that the bill, whose provisions cover both men and women, in most cases will not result in any immediate financial windfall for female pensioners. For example, the bill mandates survivor benefits for the spouses of employees who die before reaching retirement age. But in most cases, the actual value of the benefit will be ''very small,'' says Dallas L. Salisbury , president of the Employee Benefit Research Institute, a nonprofit think tank specializing in benefit issues.

While early monetary benefits may be small, ''this is the only supplement to social security that these women will have. A lot of them are living right on the line. Any extra dollars will mean a lot to them,'' says Anne Moss, director of the Women's Pension Project, an arm of the non-profit Pension Rights Center, which lobbied for the bill.

She adds that the bill is likely to affect other pension-related issues that come before Congress in the future. ''I see ripple effects,'' she said.

Business groups say the measure will produce additional administrative expenses, although the bill's total costs for the business community ''are really unknown,'' says Patricia Callahan, director of employee benefits for the National Association of Manufacturers.

The bill takes effect for most plans, except those resulting from collective bargaining agreements, after Dec. 31.

Among its major provisions, the bill:

* Requires that employees be allowed to participate in pension plans when they turn 21. Under current law, the age is 25. And once an employee is admitted to a plan, the company will be required to count toward pension benefits years of service from age 18 on, rather than age 22 as is now the case.

* Forbids pension plans from counting a one-year maternity or paternity leave as a ''break in service,'' when adding up the years of service needed to earn a pension.

* Requires that employees be allowed to leave their jobs and then return without giving up the pension credits they have already accumulated - unless the break exceeds either five years or the time the employee worked at the job before leaving, whichever is greater. Until now, such a break in service would cost employees of many companies their accumulated pension credits.

* Mandates survivor benefits for spouses of employees who die before reaching retirement age. In the past, spouses sometimes have lost survivor benefits if the employee died before reaching the age for early retirement. Mr. Salisbury notes that in many cases, the benefits a survivor receives under the new law still will be reduced for each year a worker dies before reaching the normal retirement age. If, for example, a worker dies at age 45 and normal retirement age is 65, then the benefit the employee will have earned and the spouse will collect ''will be tiny,'' he says.

* Prohibits an employee from waiving survivor benefits without the written consent of his spouse. Until this law was passed, only the employee had the right to waive such benefits.

* Repeals a rule that now allows pension plans to deny survivor benefits to a spouse if a worker dies of natural causes within two years of choosing the survivor coverage.

* Specifies that state courts may divide up pension benefits in divorce proceedings. Some pension plans have cited other government rules as a reason for not paying pension benefits to a divorced spouse.

* Limits a company's freedom to change a pension plan in such a way that employees lose benefits they have earned.

* Allows a company to give cash in lieu of a pension to an employee who leaves before retirement, if the benefit is worth less than $3,500, using government measurement criteria. The limit on such payments currently is $1,750.

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