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Office of the Press Secretary

For Immediate Release October 27, 1998


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|                            October 27, 1998                          |
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President Clinton And Vice President Gore Propose Two New Steps to Improve Retirement Security for Women. 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. Even with the achievements the President and the Vice President have had in strengthening private-pension law in order to secure and extend pension protections, there is still more work to do. That is why President Clinton and Vice President Gore are proposing two new steps to improve retirement security for women.

I. Counting Time Taken Under the Family and Medical Leave Act Toward

Retirement Vesting. The President and Vice President propose to ensure that workers who take time off under the Family and Medical Leave Act (FMLA) can count that time toward retirement plan vesting requirements. 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 vesting requirements for an entire year of work.

Example: Jane, a full-time employee with four years on the job, goes on FMLA leave in April to have a baby. She returns to work, but only works part-time because she needs to spend time taking care of her newborn child. Under current law, because Jane does not have at least five years of service credited, she might not be vested and therefore could lose the matching employer contributions and any other employer-provided pension she has earned. (Employers do not have to credit a year of service unless the employee has worked at least 1,000 hours in that year.) Under the President's proposal, because time taken under FMLA would be counted, Jane will get credit toward pension vesting for the year in which she had the baby, and will be fully vested in her pension.

Under the proposal, workers who use FMLA leave to care for a new child or critically ill family member will not suffer a pension loss as well.

Example: Susan works part-time for a year (8 hours per day, four days a week). Her child becomes seriously ill in January and she takes leave under FMLA. She returns to work in April, but reduces her hours to three days a week. Under current law, because Susan would work less than 1,000 hours that year, it would not be credited toward vesting, and she would have to work another 1,000 hours over the next year in order to earn a year of vesting credit. Under the President's proposal, she will get credit toward vesting requirements for the year in which her child became ill.

The loss of a year of vesting credit can be critical for many workers, especially women, who may have to leave the workforce to have a child or to care for a seriously ill family member. (Current law can require up to five years of service for vesting.)

II. 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 in much the same way as life insurance. Regular (typically monthly) payments are made while both spouses are alive. Then, if the former employee dies first, the surviving spouse continues to receive benefit payments for the rest of his/her life.

Currently plans are allowed to meet this requirement by offering only a "joint and 50 percent survivor annuity": under this option, the monthly pension payments to the surviving spouse are reduced to 50 percent of the level of monthly payments that were made while both spouses were alive. Many couples may prefer an option that pays a somewhat smaller benefit to the couple while both are alive but a larger benefit -- larger than the 50 percent survivor benefit

Under the President's proposal, employer plans would have to offer an option that pays a survivor benefit equal to at least 75 percent of the benefit the couple received while both were alive. In effect, couples would receive a smaller benefit when both are alive, so that the survivor or the widow would have the security of a larger benefit.

Plan participants would not be required to choose this option.

The proposal would not preclude employers from providing other options, such as the current joint and 50 percent survivor annuity or a single life annuity (with the spouse's consent). (A single life annuity pays benefits only for the lifetime of the participant.)

This proposal should be especially helpful to women, who tend to live longer than men. (A woman who is 65 years old today can expect to live to 85, while a 65 year old man can expect to live to 81.) As today's report on Women and Retirement Security shows, the poverty rate of elderly widowed women remains high. By making it possible for couples to choose to provide a bigger pension for widows, the President's proposal can help women avoid falling into poverty when they are widowed.