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To Congressmen and some industrialists, the first objective is to improve Social Security. Under a bill passed by the House and revised by the Senate Finance Committee, coverage would be extended to another 9,500,000 U.S. workers, including domestics, state and local government workers (on a voluntary basis), employees of nonprofit enterprises and the self-employed (except for ten categories ranging from doctors and lawyers to publishers and engineers). Still excluded: 7,900,000 farmers and farmhands. The new bill would double the present benefits, boosting the average individual payment to about $50 a month and setting a family maximum at $150. To pay for the new benefits, employer & employee contributions would be stepped up from 3% of all wages up to $3,600, to 7% by 1970, split evenly between employee & employer.
But many a Senator contends that the step-up in contributions is not needed, and that larger pensions could be paid out of current Social Security receipts. The Federal Government is now taking in $3 for every $1 it pays out in benefits. It has already built up a reserve (in Treasury certificates) of $12 billion. While outgo from Social Security contributions would rise as the U.S. population gets older, the contributiosn would rise much faster under the new bill. By 1990, according to Congress' own estimates, the reserves would be more than $90 billion, while outgo in that year would be $11 billion. Although the reserve would start dropping after that, some businessmen doubt that such an enormous reserve fund would be necessary.
In fact, some feel that in a free-enterprising economy, which depends upon a constantly increasing supply of capital to finance expansion and create jobs, a siphoning-off of $90 billion in cash, plus the reserves of private funds, might be dangerous. Thus, there are prospects that if & when the Senate finally approves the new bill, Congress may start another study to decide whether Social Security should move towards a pay-as-you-go basis, with only a modest reserve for emergencies.
How Many Plans?
While Social Security is a basically simple pension system, private industry plans vary greatly, and are enormously com plex because of the varying ages of workers, employment turn over, profits, and a score of other factors in every company.
In general, industrial pension plans are either contributory (employer & employee share the cost of the plan), or noncontributory (employer pays the full cost). Theoretically, either system may be financed and maintained on a pay-as-you-go basis, or funded (a reserve fund is set up to guarantee payments in good & bad years alike). Some plans—usually the contributory type—allow an employee to build up credits ("vesting"), and cash them in if he leaves the company before retirement. Still others permit an employee—should he leave the company before retirement—to leave his vested share in the company plan, collect a reduced pension when he gets to retirement age. Some offer a combination of pensions and profit-sharing.