Study: Mass. Pension System Hurts Women

October 8, 2002 ( - The Massachusetts state pension fund harms women in the state by discouraging retirees from structuring their benefits to protect their spouse if widowed, a study contends.

According to a Boston Globe news report, Ellen Bruce of the Pension Action Center said women are more apt to rely on their husbands’ pension benefits because they generally have earned less over their lifetimes than their husbands, which means their own retirement benefits are lower.

That hurts many women because male state employees are rejecting the pension option that provides surviving spouse benefits because it’s ultimately less generous, in part because the state is using grossly outdated assumptions, according to Bruce’s study.

The Globe story said the state is relying on mortality rates from 1928 – a time when a retiring 55-year-old man was only expected to live to 74. Today, a 55-year-old man is expected to live to 81.

Those shorter life expectancies presume that the retiree would die younger and the spouse would start collecting survivor benefits sooner, Dan Sherman, an actuary with Pricewaterhouse Coopers, who warned the state about the problem last spring, told the Globe.

As a result, fewer than one-third of male retirees are choosing the option that would let their wives keep part of their pension benefits if widowed, according to the study. Instead, they are opting for the higher-valued individual pension benefits that end when they die, the Globe reported.

In addition, said Bruce, the state does not require the retiree’s spouse to agree with the selection of pension plan the retiree chooses. It merely gives the spouse notification.

Although Bruce contends the system is disproportionately harmful to women, her study did not specify how many of the male retirees declining the spousal benefits are in fact married, or whether those who are married have wives who have their own pension benefits to rely upon.

Ellen Philbin, executive director of the State Retirement Board, told the Globe that   56% of state government retirees are now women and suggested the study uses outdated notions about gender.

Other actuaries agree it appears that employees of both genders in the state system face a financial disincentive to protect their spouses after their death because the system is skewed to encourage benefits for the employee alone.

Monthly benefits will always be lessened, if spread over two people’s lives rather than one, but the options are more skewed under the state system because of the formula the state uses, they said. The Pension Action Center analysis found that the pension option that benefits spouses is worth about 7% less than the individual pension benefits.