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Changing Pension Policy And The Aging Of America

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  • EMILY S. ANDREWS

Abstract

The recently enacted Tax Reform Act of 1986 contains a number of pension policy provisions including faster vesting for private‐sector, single‐employer pension plans and imposing tax penalties on preretirement pension plan distributions that are not saved until retirement age. Since pensions are a long‐term commitment, the impact of pension policy changes may not be fully realized for a number of years. For that reason, the effects of the Tax Reform Act's pension provisions are investigated using both short‐run and long‐run simulation models. Faster vesting would immediately entitle an additional 1.9 million pension plan participants to pension benefits at retirement. This increase would not, however, be translated directly into significant gains in pension recipiency for workers currently in their 50s. Nevertheless, by the time the baby boom generation retires, faster vesting and lump‐sum penalties could provide more retirees with pensions and increase the standard of living of pension recipients.

Suggested Citation

  • Emily S. Andrews, 1987. "Changing Pension Policy And The Aging Of America," Contemporary Economic Policy, Western Economic Association International, vol. 5(2), pages 84-97, April.
    • Handle: RePEc:bla:coecpo:v:5:y:1987:i:2:p:84-97
    DOI: 10.1111/j.1465-7287.1987.tb00258.x
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    References listed on IDEAS

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    1. Laurence J. Kotlikoff & Daniel E. Smith, 1983. "Introduction to "Pensions in the American Economy"," NBER Chapters, in: Pensions in the American Economy, pages 1-19, National Bureau of Economic Research, Inc.
    2. Laurence J. Kotlikoff & Daniel E. Smith, 1983. "Pensions in the American Economy," NBER Books, National Bureau of Economic Research, Inc, number kotl83-1, March.
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