Blue or White Collar Can Affect Plan Liabilities, Says Study

What type of “collar” one wears at work — that is, what sector one’s job is in and what type of work one does — affects mortality and therefore retirement plan liability, says a recent study.

The data is contained in an exposure draft of a report by the Society of Actuaries (SOA) concerning its study of U.S. retirement plans and retirement plan mortality assumptions. The report is based on 16.1 million life-years of exposure and 343,000 deaths of private-sector pension plan participants in 402 plans during the period 2010-2014.

Collar type was a “significant indicator” of mortality, the SOA found; plan participants with white collar jobs generally live longer than those with blue collar jobs. The study did not generally find significant differences in mortality between multiemployer and single-employer plans.

The report also says that income level also can give a strong indication of mortality: plan participants in the top 25% generally lived longer than those in the lowest 25%. However, the SOA found that life expectancy was higher based on collar than income, at least regarding white collar plan participants, whose life expectancy was higher than that of those in the top 25% of income. That result, the report notes, is a reversal of the results of the previous study.

The study also found that the tendency for females’ life expectancy to exceed that of males continues to be the case.

Implications for Plans

While the report says that life expectancy is not used directly in the valuation of retirement plan liabilities, nonetheless it can give an indication of the direction plan liabilities are headed. In general, says the report, higher life expectancies spell increased plan liabilities, and lower life expectancies portend lower liabilities.

The SOA says that most plan sponsors that pension liabilities will change little — 1% or less — is they update mortality assumptions based on the findings in this study. However, says the report, the amount that pension liabilities will change “will vary depending on the plan’s mix of collar, age, and gender, as well as the discount rate and other assumptions used to compute liabilities.”

Accordingly, the report says that liabilities may drop by generally 1% for pension plans that use unadjusted tables concerning white collar plan participants, but that liabilities could fall by even more for older white collar participants. Similarly, plans using unadjusted blue collar tables could see liabilities up to 1.5 % lower for females an older males; however, plan liabilities for younger males in blue collar jobs may increase by as much as 1.7%.