TECHNICAL APPENDIX

The results of survey analysis can vary depending on the definitions and assumptions used to classify the data elements. In this report, for example, different sections and tables focus on different groups of retirees such as all retirees versus private sector only retirees. Different tables also focus on different groups of pension recipients, such as annuity recipients or lump sum recipients. The purpose of this appendix is to explain some of the major assumptions used in the analysis, and the reasons behind variations in retiree pension receipt rates between different sections of the report and different tables.

Pension benefits. Benefits provided by pension plans can be categorized differently depending on the type of benefit and the purpose for which used. The basic types of benefits provided by pension plans are life annuity, a single lump sum distribution, and a series of fixed payments made for a specified period. (In this report, the two latter types of benefits are classified together as lump sum distributions.)

For workers terminating employment prior to retirement with vested pension benefits, the benefits (depending on plan provisions and employee elections) may be paid out immediately or deferred until the employee reaches the retirement age specified by the plan. When benefits are paid immediately in the form of a lump sum distribution, the worker has the option of rolling the distribution over into retirement savings or using it for other purposes.

Many of the tables in this report show the percentage of retirees and workers receiving pension benefits. The percentages in these tables vary because of different measures used to classify pension benefits. The first and narrowest measure used in calculating the percentage of retirees with pension benefits includes only retirees receiving annuities and retirees who received lump sum distributions either after age 54 or at an earlier age and rolled over into retirement savings. This measure, used in Tables A2, and A3, yields a 40% pension receipt rate.

A broader measure of pension receipt includes retirees who have no current pension benefits but who are entitled to receive benefits based on a deferred vested benefit (generally payable upon reaching a specified age). The inclusion of this group increases the retiree pension receipt rate to 42%. This measure is used in Table A1.

Finally, the additional inclusion of retirees who received a lump sum distribution during their working years but used it for purposes other than retirement savings, increases the pension receipt rate to 43%. The tables in Section C use this broadest measure of pension receipt.

Health benefits. For all persons ages 40 and over with employee benefits based on a prior job, a series of questions about the characteristics of the job providing the benefits were asked. (Those with no benefits were asked about their longest prior job.) Because of concerns about respondent burden, questions were asked about only one prior job. This presented no problem in the case of persons receiving only pension benefits or only health benefits or both pension and health benefits from the same employer.

However, about 2% of all retirees received pension benefits from one employer and health coverage from a different employer. For this group, questions were asked about the employer providing the pension benefits. For purposes of classifying persons with health benefits by sector (private or public employment), it was assumed that retirees received health benefits from an employer in the same sector as the employer providing pension benefits. No assumptions were made for this group about other characteristics of the employer providing the health plan such as industry or size of firm. Instead, these characteristics were categorized in the tables as unavailable.

Reasons for dropping health employer health insurance. Many retirees without employer provided health insurance did have such coverage while employed or during the initial period of their retirement. These groups of retirees were asked the reasons why they no longer have such coverage. About 10% to 15% of retirees gave multiple responses to this question. For simplifying purposes, only the initial reason given was used in tabulating the data. Because of this assumption, the percentage of retirees citing each reason they are no longer covered by the plan is lower than the actual number giving the reason, including those citing it as a secondary reason.

Questions about reasons retirees are no longer covered by an employer health plan were also asked in the supplement to the August 1988 CPS. In this survey, fewer categories were provided for the responses. In the tables comparing responses in the 1988 and 1994 surveys, some of the response categories in the 1994 survey were combined to match the categories provided in the 1988 survey.