The Association of U S West Retirees



Pension plans 'inequitable', professor says
By Russ Wiles
The Arizona Republic
Thursday, Nov. 10, 2005

Have you ever thought of retirement plans and the tax incentives that support them as discriminatory?

Sonya Michel has.

The University of Maryland professor, speaking in Mesa on Tuesday, said the current system has tended to make things tougher for women, some minority groups and gay couples. advertisement

"I'd say the pension system is inequitable:  Everyone has to pay in (through tax obligations), but not everyone will benefit equally," Michel said at a forum sponsored by Johns Hopkins University's Center for Transatlantic Relations.

The event brought a small number of French and American scholars, consultants, journalists and some French Embassy officials to the Valley.

Michel, who is now writing a history of U.S. pension-welfare policies as a fellow at the Woodrow Wilson International Center for Scholars in Washington, D.C., said women have accumulated lower retirement benefits than men because of smaller salaries over the years and because of child-rearing obligations that caused breaks in their work records.  The problem shows up in fewer Social Security credits, smaller pension benefits and slimmer 401(k) nest eggs.

All such programs are supported by the tax code, from the payroll taxes that fund Social Security to tax deductions or other breaks on traditional pensions, individual retirement accounts and 401(k)-style programs.

Also, she contends that women and some ethnic minorities were less likely to land jobs at companies offering traditional pension programs when such plans were popular a couple of decades ago.

For this reason, Michel said, she doesn't support a taxpayer-funded bailout of the Pension Benefit Guaranty Corp., should it become necessary.

"Why should all taxpayers support a fund," she asked, "when only one-sixth of workers had the privilege" of laboring at pension-sponsoring companies, which included some of the nation's biggest and most prestigious firms?

Meanwhile, gay couples are hurt by Social Security policies that don't recognize non-spouses as beneficiaries, Michel said.  IRAs and 401(k) plans don't come with this beneficiary restriction.

The Mesa conference explored different ways France and the United States are confronting aging populations and the strain on pension systems.

Laure Delahousse, former director of retirement savings for a French association of investment-management firms, said she felt people in France generally were more comfortable with their state-run, pay-as-you-go pension system compared with Americans' support for Social Security.

Still, she noted France has adopted supplementary retirement programs that resemble the 401(k) programs prevalent in America.

One recent innovation allows some workers to contribute 4,600 euros (over $5,300) yearly into their accounts, with the money reserved for retirement or to buy a primary residence.

The plan can be offered at companies where a labor union has agreed to the deal.

Workers can chose among at least three mutual funds, but they can't invest in their companies' own stock, unlike with most 401(k) programs.

"There's a clear separation of company assets from employee assets," Delahousse said, noting that French policymakers learned a lesson from the Enron Corp. debacle.

Reach the reporter at or (602) 444-8616.