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Summary:
As the members of the "baby boom" generation people born between 1946 and 1964 approach retirement, the demographic profile of the U.S. workforce will undergo a substantial shift: a greater number of older workers will be joined by relatively few new entrants to the labor force. According to the U.S. Bureau of the Census, while the number of people between the ages of 25 and 64 will grow by about 18.4 million between 2000 and 2015, an estimated 86% of this increase will occur among people ages 55 to 64. The labor force participation rate (the percentage of people either employed or unemployed but looking for work) among men 55 and older is lower today than it was a half-century ago. Most of the decline, however, occurred over a brief period from about 1970 to the mid-1980s. At the same time, the labor force participation rate among women ages 55 to 64 has risen steadily from 27% in 1950 to 52% in 2000. Data collected by the Census Bureau indicate that during the period from 1995 to 2001, employment remained generally steady among men 55 to 61 years old and rose among women in this age group. Of men ages 55 to 61, 72% were employed in 2001, the same percentage as in 1995. Employment among women ages 55 to 61 rose from 54% in 1995 to 58% in 2001. Among men ages 62 to 64, 46% were employed in 2001, compared with 42% in 1995, while among women ages 62 to 64, employment increased from 31% in 1995 to 37% in 2001. Labor force participation declines both with increasing age and with the receipt of pension income. Among men ages 55 to 64 who received income from a private pension or retirement savings plan during 2000, 38% were employed either full-time or part-time in March 2001. Among women 55 to 64 years old who received income from a private pension or retirement savings plan in 2000, 33% were employed in March 2001. Among people 65 or older, only 12% of men and 8% of women who had private pension income in 2000 were employed in March 2001. As millions of workers reach retirement age over the next several years, employers might wish to induce some of those who would otherwise retire to remain on the job, perhaps on a part-time schedule. This is sometimes referred to as "phased retirement." Several approaches to phased retirement such as job-sharing, reduced work schedules, and rehiring retired workers on a part-time or temporary basis can be accommodated under current law. Some of these approaches, however, require the individual to separate from the firm before returning under an alternative work arrangement. Under current law, a pension plan cannot pay benefits unless the recipient has either separated from the employer or reached the pension plan's normal retirement age. Some employers see the statutory prohibition on in-service pension distributions as an obstacle to establishing phased retirement plans. They would prefer that employers be permitted to begin partial pension distributions to workers when they reach the company pension plan's early retirement age. In addition, they would like to be able to limit participation to workers in particular occupational categories. However, targeted participation could cause the plan to violate the provisions of the Internal Revenue Code that prohibit pension plans from discriminating in favor of highly-compensated employees in terms of benefits.
