THE WHITE HOUSE AT WORK
Tuesday, October 27, 1998
THE CLINTON/GORE ADMINISTRATION:
RETIREMENT SECURITY FOR WOMEN
I believe Social Security is an issue that should bind the American people not only across generational divides, but across party lines. It is an issue that offers a choice between moving forward and turning back. I think that is a very clear choice for the American people.
President Bill Clinton
October 27, 1998
Today, President Clinton and Vice President Gore hold a roundtable discussion on Social Security, women and retirement plans at the White House. The President will unveil two new proposals to improve retirement security for women, one to allow workers who take time off under the Family and Medical Leave Act (FMLA) to count that time toward retirement plan vesting, and a second proposal to add benefit security to survivors of pension plan participants.
A Presidential Commitment To Saving Social Security. During this time of economic prosperity, there is no more important task then strengthening Social Security for the 21st Century. By 2013, money put into Social Security will no longer be enough to fund what it pays out, and we will have to dip into the Social Security Trust Fund. By 2032, the trust fund will be empty, and the money Social Security takes in will only be enough to pay 72 percent of benefits. These realities are particularly important to women, who make up 60 percent of all aged beneficiaries, and 72 percent of recipients over the age of 85. Without Social Security more than 50 percent of elderly women would be in poverty.
Working To Improve Retirement Security For Women. Although Social Security has a number of features designed to help women meet economic challenges, too many retired women, after providing for their families, are having trouble providing financial security for themselves. That is why, for nearly six years, President Clinton and Vice President Gore have worked hard to expand pension coverage, make pensions more secure, and simplify pension plan administration. Despite the achievements the President and Vice President have had in strengthening private-pension law in order to secure and extend pension protections, there is still work to do.
Allowing Workers To Count FMLA Time Toward Retirement Plan Vesting. The President is proposing that workers who take time off under the Family and Medical Leave Act (FMLA) be allowed to count that time toward retirement plan vesting. Under FMLA, eligible workers are entitled to up to 12 weeks of unpaid leave to care for a new child, to care for a family member who has a serious health condition, or because the worker has a serious health condition.
- Counting time taken under FMLA can make the difference between receiving or not receiving credit towards minimum pension eligibility requirements for an entire year of work;
- Under the proposal, workers who use FMLA leave to care for a new child, a family member who has a serious health condition, or because the worker has a serious health condition will not suffer a pension loss.
Since current law can require up to five years of service to become vested, the loss of a year of vesting can be critical for many workers, especially women, who may have to leave the workforce to care for a seriously ill family member or raise a child.
Added Benefit Security For Widows and Widowers. Traditional pension plans are currently required to offer to pay pension benefits in the form of a "joint and survivor annuity" option. This protects the surviving spouse of a plan participant/ex-employee and offers regular (typically monthly) payments while both spouses are alive and to the surviving spouse for the rest of his/her life. These plans, however, can meet current requirements by offering only a "joint and 50 percent survivor annuity" which trims the pension payment in half upon the death of the plan participant/ex-employee. Under the President's proposal:
- These plans would have to offer an option that would pay a reduced benefit while both spouses are alive but provide the surviving spouse a benefit equal to at least 75 percent of the benefit the couple received;
- Plan participants would not be required to choose this option.
The proposal would not preclude employers from providing other options, including the "joint and 50 percent survivor annuity" or a single life annuity (which pays benefits for the lifetime of the participant only), however, they would be required to also offer a survivor benefit equal to at least 75 percent of the reduced benefit received during the couple's lifetime.