President Ronald Reagan signed the Retirement Equity Act of 1984,
which broadens the conditions under which spouses receive retirement
benefits. Under the act, spouses of employees who die after attaining
eligibility for pensions are guaranteed a benefit beginning at age 55; a
prospective survivor must agree in a signed, notarized statement before
a pension plan member can waive the option of providing a survivorship benefit (previously, the plan member had the sole right to decide); and
the divorced spouse of a plan member is entitled to part of a pension,
if stipulated in the separation papers or ordered by a judge.
Also, the new act:
* Requires employers to count all service from age 18 in
calculating when an employee becomes vested (legally entitled to a
pension, which usually requires 10 years of service). In computing the
amount of benefits, all employee earnings from age 21 must be
considered. (Previously, service accrual toward vesting began at age 22
and benefits were based on earnings from age 25.)
* Permits pension plan members to leave the work force for up to 5
consecutive years without losing pension credits.
* Allows plan members to take maternity or paternity leave of up to
1 year without loss of service credit for the period.
* Permits employees of companies that have thrift (savings) plans
to join as early as age 21. These plans generally provide for employers
to match some of the money the employee invests.
* Requires employers to explain to employees the tax consequences
of taking lump-sum amounts from pension or profit-sharing plans.
Supporters praised the act, saying it “alters certain rules
that in some cases allowed pension plans to ignore the changing needs of
women and others in the work force.”
The new provisions, which amend the Employee Retirement Income
Security Act of 1974, are effective December 31, 1984. For pension
plans established through collective bargaining, provisions take effect
when the contract pertaining to the pension plan expires, or January 1,
1987, whichever comes first.