COMPREHENSIVE RETIREMENT REFORM AND

EMPLOYMENT: VERMONT

FRIDAY, JUNE 11, 1982

U.S. HOUSE OF REPRESENTATIVES,

SELECT COMMITTEE ON AGING,

SUBCOMMITTEE ON RETIREMENT INCOME AND EMPLOYMENT,

Woodstock, Vt.

The subcommittee met, pursuant to notice, at 9 a.m., in the Woodstock Town Hall, Hon. James M. Jeffords presiding.

Members present: Representatives Jeffords of Vermont and Gregg of New Hampshire.

Staff present: Nancy E. Hobbs, minority staff director, Subcommittee on Retirement Income and Employment. Kathleen McGreevy, office manager, Susan Boardman, staff assistant, and Elaine Kellogg, legislative assistant, of Representative Jeffords staff.

OPENING STATEMENT OF REPRESENTATIVE JAMES M.

JEFFORDS

Mr. JEFFORDS. I will call the hearing to order.

We have a rather lengthy day ahead of us. I want to make sure we get started as close to on time as possible.

First of all, I want to give thanks to some people who have worked very, very hard on these hearings. In particular I want to give thanks to Beth Findlayson, and the senior citizens of the Woodstock Senior Citizens Center, who have been wonderful in helping us set up. And I would like to let you know they do have a lunch available at their center, which is west on Route 4, within walking distance. I would certainly hope people will go down and take advantage of their hospitality. They are also helping us out in the front today.

I want to thank the town manager's office for making these facilities available and helping us coordinate and have the hearings here in Woodstock.

I also want to thank Nancy Hobbs of the committee, who has been here in helping set up, and also members of my staff, and Judd Gregg's staff who have all done an excellent job in helping make these hearings available to us here in Vermont.

I am especially pleased that my friend and neighbor from New Hampshire, Judd Gregg, joined with me initiating today's hearings. We have served together on the Aging Committee during this Congress and we are fortunate that he was chosen to serve in this committee as soon as he arrived in Congress. Judd has taken a special

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interest in economic issues of importance to the elderly, such as social security, private pensions, and the effect of inflation on the elderly.

In the short time he has been in Congress, he has worked actively with other Members to promote legislation to benefit older Americans, such as low-income energy assistance and home weatherization programs.

In December, you may recall the difficulty many New England States were experiencing in obtaining Federal low-income energy assistance payments. Judd Gregg was responsible for contacting HHSD Secretary Schweiker on this matter and, as a result, New Hampshire received critically needed energy funds expeditiously. Judd has also been active in the congressional efforts to continue funding for the title V employment program that is so successful here in Vermont and in New Hampshire.

I want to welcome our distinguished witnesses from Vermont and New Hampshire and thank you for the important role you will play in the deliberations of this subcommittee. We are especially honored to have Mr. Robert Myers, Executive Director of the National Commission on Social Security Reform with us today. President Reagan appointed this bipartisan commission to report by December 1982 on the status of social security financing and make recommendations for reform. We are especially pleased that Mr. Myers has consented to provide the subcommittee and today's audience with some indication of the direction the Commission is taking to resolve this momentus issue.

The proceedings of today's hearing are being transcribed by our very competent court reporter, Mr. Mills. The record will be printed and available in a couple of months through my district offices and Mr. Gregg's.

Following the testimony of the scheduled witnesses, we will be honored to receive statements from the audience. If you plan to make a statement, please give your name and address to Ms. McGreevy of my staff. We will call the names on this list in the order in which you have registered. Please limit your remarks to 5 minutes. If several persons plan to speak on the same issue and share a similar point of view, you may wish to appoint a spokesperson for the group.

We will adjourn for lunch at noon and reconvene at 1 p.m.

The purpose of today's hearing is to obtain recommendations on a subject that Judd and I consider a major priority, reform of our entire system of meeting the income needs of older persons who choose to retire, as well as the employment needs of those who wish to remain in the work force. It has been said that Washington is 100 square miles surrounded by reality, and I share that view to some extent. Field hearings such as this one give the committee an opportunity to obtain a first-hand account of the real needs of our Nation's elderly as well as to determine the most pragmatic and effective means of addressing these concerns.

The hearing record serves as a blueprint for legislative action, and of a source of recommendations. I would say that also we wished to have the chairman of the subcommittee here with us today, John Burton, but unfortunately, due to confusion over the

budget and some other problems, he was unable to be here as he had to return to California.

Today we hope to answer several important questions: Have our national policies to provide retirement income through social security, private pensions, and savings succeeded or failed? How successful have our efforts been to protect older workers from the most insidious threat to their well-being, age discrimination.

To what extent have current economic pressures had an adverse impact on the older person in search of employment or on the purchasing power of the retiree? And what are the responsibilities of the public and private sectors in responding to the economic plight of the elderly?

The final report of the 1982 White House Conference on Aging confirmed the fact that an adequate retirement income heads the list of concerns of our Nation's elderly. We recently learned that the social security system could fall short of meetings its obligations by July 1983, 1 year sooner than the trustees reported last year. With respect to the long-term situation, the OASDI [social security disability) trust funds will have a 25-year surplus averaging $8.5 billion annually after the 1980's. However, the HI (medicare) will begin to encounter deficits averaging $27.5 billion annually at the same time. Thus, we have an immediate problem that is resultant from depressed economic conditions and a long-term problem related to changing demographics as well as increased demands on medicare.

I am optimistic that the National Commission will propose responsive solutions to both dilemmas and that Congress will respond with corrective legislation early next year. However, social security reform in a vacuum will not insure the retirement security of our present or future elderly population.

No single source of retirement income was intended to meet the income goals of the elderly. Social security, while meeting many of the income goals of the elderly as a group, falls short of meeting the needs of individuals, especially when it is the sole source of retirement income. Private pensions and savings may be an important source of income for the individual, but these sources are limited and fall short of meeting many of our social goals.

Retirement income programs affect each other profoundly, such as the integration of private pensions contributions made by the employer with social security. Thus, no one source of income should be evaluated in isolation of the other. Social security provides 38 percent of the aggregate money income of the 65 and over population, while earnings provide 23 percent, income from assets 19 percent, and private pensions only 7 percent.

Despite the fact that social security benefits have increased significantly in the past decade, the income of older persons remains only one-half of their younger counterparts. The inability of the social security system to expand further places a growing emphasis on the role of the private pension system, savings and employment in retirement income policy.

Approximately 90 percent of all persons 65-plus receive income from social security, with average monthly benefits for a single worker of $341 or $513 for couples. However, only 25 percent of

current retirees are receiving income from pensions with benefits averaging $300 per month.

The current trend of shifting resources from the public sector to the private sector through budgetary, tax and regulatory policies may give our private sources of retirement income a needed boost. In the decade of the 1980's we must look for new solutions that will involve new partnerships between business, labor, the voluntary sector, the community, the family, and the public sector. The focus of these new partnerships will be to invent innovative ways of combining public and private financial and human resources to meet a variety of social and economic needs. The employment needs of older workers could be met through such a partnership, through innovations such as flex-time and part-time employment. While the private sector could open many doors of opportunity for older workers, the Federal Government could supplement these efforts by removing barriers to the continued employment of older workers by removing the earnings limitation under social security and streamlining pension laws such as ERISA.

Again, I would like to welcome you to this Select Committee on Aging field hearing that takes a broad perspective on retirement income sources. National attention is now focused on the Nation's retirement policies. We are in a unique and extremely favorable position to come up with some excellent recommendations on how to deal with the problems that exist with these policies. I look forward to working with everyone here today.

Judd, I turn to you now for comments.

STATEMENT OF REPRESENTATIVE JUDD GREGG

Mr. GREGG. Thank you, Mr. Chairman. It is a pleasure to be here. I want to congratulate you and your staff for putting this hearing together.

Vermont is lucky to have you representing them in Washington. It has been a pleasure for me to work with you for the last 2 years. You have been a leader not only in the area of the concerns of retirement income, but also in the area obviously of agriculture, and just generally a leader on the floor, a person I turn to for advice and counsel. I certainly appreciate the chance to be here today with you.

It is essential and a very important issue that we confront today. The reason it is so important is because our generation must confront the issue of how and when we retire-two people in the work force support one person in retirement. Back in 1950 there were 16 people paying into the social security fund for every one person taking out. Around the year 2000, 2130, there will be two people paying into the system for every one taking out. You can see from the demographics of that alone we confront a massive cash flow problem in the long term.

Second, we confront a very serious cash flow problem, which was excellently outlined by Congressman Jeffords, in the short term, between now and the year 1990.

I look forward to hearing the thoughts of the audience and our panel on how we can adequately address this essential issue in America. Because when you look at the issues which Government

is involved in, which affect the American people, probably no one issue is more all-encompassing than social security, because not only are there 36 million people benefiting from the program, but there are 90 million people who are working and paying into the program. So we are covering just about everybody in the country, whenever we do anything that affects social security.

I want to thank you folks for attending today. I especially want to thank the members of the New Hampshire House who are here. I see a large group of members here. I see Representative Lamont, Representative Buckman, Representative Spalding, Walburton, Palmer. I am sure there may be other members here, but it is certainly a great tribute to the New Hampshire House that so many folks have taken the time to come here to Vermont and participate in these hearings.

I look forward to our proceedings. I also appreciate the fact that we are back here in New England, where it is nice and cool and refreshing, versus Washington where it is overwhelmingly humid. It is a pleasure to be here.

Thank you, Jim, for putting this together.

Mr. JEFFORDS. Thank you very much. We are going to deviate slightly from the schedule as outlined.

First of all, we are so pleased to have Robert Myers here with us today that I am going to ask him to come down and start off. Then we will question Mr. Myers, and move on to the rest of the panel regarding the social security for their comments on Mr. Myers' comments, and also to hear from them specifically.

That will probably put us behind immediately on the schedule, but I think we are so fortunate to have Mr. Myers with us that I certainly want to have the people from New Hampshire and Vermont to have the benefit of his wisdom. It is my understanding he has all the answers to the problems. We are very anxious to hear them.

First of all, I would like to point out that we intend to start with a discussion of the social security situation, and then move on to a panel discussing employment problems with respect to the elderly; then the final panel this morning, which will be the retirement savings and private pension panel.

This afternoon we will be listening to citizens who desire to participate. We have a long list. But I would like to say from my experience that the witnesses that give us probably the best and most concise information are those that come in that latter part-with no disrespect to the panels.

In Washington this past week we had hearings on the dairy industry, and the witnesses that probably gave us the most useful information were the last two farmers, who happened to be from Vermont. But I would say the testimony they gave to us was most to the point, and the most graphic in demonstrating the plight of dairy farmers. So I really look forward to listening to the individuals who will be discussing the problems with us this afternoon.

With that, Mr. Myers, it is really a pleasure to have you here. I am so pleased that you would take time from your busy schedule to come up here and share with us your thoughts on the social security problems. I am sure both Congressman Gregg and I will have some questions for you when you finish.