Assessing Policies for Retirement Income Needs for Data, Research, and Models (1997) / Chapter Skim
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Executive Summary
Executive Summary
Pages 1-9
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With growing competitive pressures on employers to constrain employee compensation costs, will maintaining pension and retiree health care benefits (or extending them to uncovered workers) take lower priority than maintaining wages?
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On the basis of published reports and interviews with analysts, however, we determined that the problems with estimating the likely effects of proposed health care changes were due in only small part to the deficiencies of projection models as such: rather, models were significantly handicapped by the poor quality and lack of relevant data and behavioral research. For example, many proposals relied heavily on employer-based health insurance coverage, yet little information was available on employers' current health care costs or on their responses to changes in costs.
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However, information with which to analyze the behavior of employers will require significant enhancement of existing databases and, possibly, new data collection as well. When relevant data and research insights are more complete, it will be important to develop improved large-scale models for projecting the likely effects of a variety of alternative policy proposals on employers, workers, and retirees.
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Thus, there is little basis on which to project the likely effects on savings decisions and, hence, on retirement income security, of changes in employer pensions and government policies. Considerably more is known about labor supply and retirement behavior.
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For example, no information is available on how many and what kinds of employers recently offered special incentive plans for early retirement such as "window" plans or intend to do so in the near future. Given the central role of employers in providing retirement income and health care benefits, the lack of an adequate database is a major handicap to evaluation of alternative policy proposals in these areas.
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needs to be linked to the broad array of data for individuals that is available from such panel surveys as HRS and AHEAD. Similarly, linkage of employer survey data with administrative records could provide enhanced analysis and modeling capability at low marginal cost, although issues of confidentiality protection are more difficult for employer data.
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interactions among policies, such as how changes in Social Security or Medicare may affect coverage and benefits of employer pension plans and health insurance for retirees; · heterogeneity or variability among workers, employers, and retireessuch as how a proposal may affect people of different income levels or couples in comparison with single people, and how fluctuations in markets and interest rates may produce winners and losers for retirement income from personal savings and pensions invested in IRA-type accounts; and · long-term effects, such as the extent to which changes in the tax treatment of employee or employer contributions to pension plans may alter the behavior of
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Existing models do not provide an adequate structure or database on which to build an improved model, although some of their components could contribute to such a model. Important capabilities for a new model are to estimate dynamically the effects of policy changes on individual behavior, to interact with employer-based models of worker demand and benefit offerings and with macro models of the economy, and to simulate random and cyclical shocks to employment and savings from such forces as market ups and downs.
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From page 9... ...
Construction of such models would be premature until better data, research knowledge, and computational methods are available. To respond to immediate policy needs, agencies should use limited, special-purpose models with the best available data and research findings to answer specific policy questions.
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