Growth in Employee-Benefit Plans by ALFRED M. SKOLNIK and JOSEPH ZISMAN* Employee-benefit plans in recent years have shown striking private agencies) or exclusively by advances in the number of employees covered and in the amounts nonpublic agencies, there has been expended for contributions and benefits. To what extent have little tendency for individual employ- these advances outpaced the growth in the Labor force and the ers or insurers to deviate from the rise in the wage scale? Do they represent a real improvement for statutory pattern. Statutory provi- the individual worker in the adequacy and scope of the pro- sions for employer’s liability (for rail- tection provided? This article, in addition to presenting road and certain maritime workers, statistical data on employee-benefit developments for 1954 and for example) have shown similar de- 1956, throws some light on these questions. It also considers velopments. Consequently, these ben- the growth of private pension plans, which increasingly provide efits have traditionally been regarded benefits supplementary to old-age, survivors, and disability as outside the purview of “fringe” insurance. benefits, which are normally spon- sored or initiated by employers and MPLOYEE-benefit plans contin- programs-such as old-age, survivors, employees? ued to grow in 1956 as a sig- and disability insurance, unemploy- The use of the term “private” E nificant element in the eco- ment insurance, and the railroad re- in describing employee-benefit plans nomic security structure that has tirement system-that are applicable sometimes leads to the inference that developed in the last quarter of a on a compulsory basis to the labor the plans are confined to employees century to meet the contingencies of force in general or to specific cate- in private industry. Many govern- old age, death, accident, disability, gories in the labor force. mental jurisdictions, however, have unemployment, and the costs of A difficult question relates to the made special provisions-as employ- medical care. Coverage, contributions, treatment of those private em- ers-for certain groups of govern- and benefits under employee-benefit ployee-benefit plans, sponsored and ment employees. Moreover, most of plans all showed sizable increases underwritten by nongovernmental the available data on such employee- from 1954, the latest year for which srganizations but written in com- benefit plans as group life, hospitali- data were published in the BULLETIN.~ pliance with State temporary dis- zation, and medical care insurance Employee-benefit plans have to a ability insurance laws. In other do not readily permit a distinction large extent developed side by side series published in the BULLETIN, to be drawn between plans for gov- with social insurance and other gov- the benefits paid under such ernment employees and those in pri- ernment measures for economic se- plans are included with social insur- vate industry. In this article, no at- curity, especially in the last decade. ance expenditures, since they are tempt is made to separate or omit For this reason, there has not always compulsory under State law. In this the data on government employees been a clear-cut distinction between article, such disability benefit plans except for those specific plans, such those programs or parts of Programs are treated as private plans because as retirement and sick-leave plans, that might be categorized as em- their omission would distort the where the government in its capacity ployee-benefit plans and those that relative extent and nature of the as an employer pays benefits directly might more properly be considered protection existing through private to its employees. as social insurance or related meas- arrangements against the risk of ures. In this article, the term “em- nonoccupational disability and also Trends, 1954-56 ployee-benefit plan” has been used to because their benefits tend to be Notable advances in coverage, con- denote any type of plan sponsored or somewhat higher than the statutory tributions, and benefits took place initiated unilaterally or jointly by requirements. during the period 1954-56. Coverage employers and employees and pro- Workmen’s compensation and pay- for life insurance, for example, in- viding benefits that stem from the ments under employer’s liability, -- employment relationship and that 21n recent years, with the maximum which are omitted from the data, in- benefit provided for occupational disability are not underwritten or paid directly volve still other considerations. His- under workmen’s compensation generally by government (Federal, State, or torically, workmen’s compensation lagging behind both wage levels and bene- local). These plans are often termed has developed as a social insurance fits for nonoccupational disability under “private” employee-benefit plans to employee-benefit plans, some employers program, with statutory application have made provisions for supplementing distinguish them from those public in all States to the general labor the statutory workmen’s compensation force. In a number of States, work. benefits. To the extent that these supple- * Division of Program Research, Office of men’s compensation benefits are paid mentary payments are not segregated from the Commissioner. by public agencies. In the States the payments made for nonoccupational 1 See Joseph Zisman, “Private Employee- illness, they are included in the data un- Benefit Plans Today,” Social Security where they are underwritten on a der “temporary disability (including Bulletin, January 1957. competitive basis (between public and formal sick leave) ” payments, 4 Social Security creased by 22 percent, contributions For every type of employee benefit, ment insurance programs, the flrst by 34 percent, and benefits by 36 growth in coverage kept ahead of plans called for contributions to be- percent. Tables 1, 2, and 3 show the the ‘growth in the labor force. In gin in June 1955 and benefits in trends for various types of employee the case of temporary disability and June 1956. Expanding into the glass, benefits. retirement benefits, the difference rubber, metal, steel, and maritime was slight, but for surgical and med- industries, supplemental unemploy- Coverage ical benefits and life insurance the ment benefit plans covered an esti- At the end of 1956, hospitalization rate of growth was considerably in mated 2 million workers or 4 per- and life insurance were still the most excess of that for the labor force. cent of the private labor force by common types of employee protec- Fifty-nine percent of the wage and the end of 1956. tion, covering some 35.5 million em- salary labor force, for example, was ployees (table 1) . Surgical expense covered for surgical expense at the Contributions insurance was a close second, with end of 1956, compared with 53 per- Employer and employee contribu- 33.1 million covered employees. In cent in 1954; 40 percent had medical tions to employee-benefit plans to- addition, hospital expense insurance expense protection in 1956, compared taled an estimated $8.7 billion in covered 53.5 million dependents, and with 32 percent in 1954. 1956, an increase of 27 percent from surgical expense insurance 49.0 million. The a-year period saw the intro- the 1954 estimate of $6.8 billion The greatest increase from 1954 duction on a large scale of one new (table 2) . Of the $1.9 billion increase, to 1956 in the number of employee major type of employee-benefit plan private retirement plans were re- participants was reported for life in- -supplemental unemployment bene- sponsible for the greatest share ($0.7 surance and for plans affording med- fits-resulting from union-industry billion), with hospitalization ($0.4 ical expense benefits. Both types of negotiations in the automobile indus- billion) and life insurance ($0.25 plan increased their employee cover- try. Designed to supplement the un- billion) ranking second and third. age by more than 5.5 million. An employment benefits provided workers Percentagewise, the greatest gain- increase of 5.3 million was recorded through the Federal-State unemploy- other than that in major medical ex- in plans providing surgical benefits and one of 4.4 million in hospitaliza- Table 1 .-Estimated number and percentage of wage and salary worki>= tion plans. their dependents covered under employee benefit plans, 1 by type of benefit, Except for the new and rapidly December 31, 1954 and 1956 expanding field of major medical ex- pense insurance, which showed an Covered em- Numbers (in millions) Illoyees as per- increase in employee coverage from I cent of wage less than a million in 1954 to 3.6 and salary Type of benefit 1954 1956 labor force 2 million in 1956, the greatest percent- IL- age gain occurred in medical expense Em- De- Em- De- coverage-33 percent. Other types of Total ploy- pend- Total Ploy- 1954 1956 ees ents ees %ttm employee protection showed smaller __- rates of increase, ranging from about Life insurance and death benefits a--.- 30.9 29.8 1.1 37.7 35.5 2.2 56.7 62.8 10 percent in temporary disability in- Accidental death and dismember- rnenta~~~~~-~-~~~~_.~-~~-.---~~~~. 14.0 14.0 ___._.. 17.3 17.3 _ _ _ _. _. 26.6 30.6 surance plans to 24 percent in group Hospitalization 5__________. ._________ 75.3 31.1 44.2 89.0 35.5 53.5 59.1 62.8 accidental death and dismemberment Surgicala _____.--- ..____._._. ._._____ 66.2 27.8 36.4 82.1 33.1 49.0 52.9 58.6 Medicals........-.......-.---.-.---.- 38.1 17.0 21.1 54.G 22.6 32.0 32.3 40.0 insurance. Even larger percentage Major medical expense 5____._. -.--__. 1.9 .8 1.1 8.3 3.6 4.7 1.5 6.4 gains were recorded in the number Supplemental unemployment bene- fitse.-...-.-------...-- _ _________-_-_-__, 2.0 2.0 ‘4.1 of dependents covered, with the great- Temporary disability (including for- est growth reported in the relatively malsickleove)s- .___ _..