Private Pensions

Pursuant to a legislative requirement, GAO reviewed the effect of federal pension rules on women, focusing on: (1) specific pension rules that affected benefit equity between men and women; and (2) the effect that changes in the Tax Reform Act of 1986 (TRA) would have on benefit equity.

GAO found that: (1) before TRA, most pension plan participants were in large employers' plans that generally allocated benefits equitably, although many small employers' plans were inequitable; (2) most defined benefit plans sponsored by small employers favored the higher-paid, even after the addition of social security benefits; (3) before TRA, many small employers integrated their pension plan formulas and used the fractional accrual method of apportioning benefits among participants, resulting in disproportionately higher benefits for higher-paid and older employees; and (4) TRA integration changes and proposed Internal Revenue Service nondiscrimination rules limiting fractional accrual would substantially limit the extent to which a plan may favor the higher-paid.