Policy Simulation Group

Pension Projection Models

Enhancements Introduced in Current 1/27/12 Version of PSG Models

1. Add to PENSIM input database a new parameter, DBWITH1.cabal2dac, that controls the disposition of vested balances that are rolled-over (rather than being cashed-out, and therefore, not used to generate retirement income) from DB/CA (cash-balance) plans at job end. In prior versions of PENSIM, the hard-wired behavior was to transfer the DB/CA plan balance to the individual's rollover account. Now, the transfer to rollover account behavior occurs only in years for which DBWITH1.cabal2dac is false. In years when the new parameter is true, vested DB/CA plan balances that are rolled-over at job end are used to buy deferred annuity contracts (dac), which are converted into immediate annuities at retirement. See the DACCHAR table for details on the deferred annuity asset, which was added to PENSIM in November 2010.
2. Specify DBWITH1.cabal2dac to be true for all years in the 2011 benchmark runs. (The old transfer DB/CA balance to rollover account behavior continues the be part of the baseline assumptions for runs that use pre-2011 Trustees Report assumptions.) This change allows retirement income generated by DB/CA (cash-balance) plans to be included with retirement income generated by other DB plans in the PENSIM .pen output file. See the revised documentation of that output file for details. This switch in behavioral assumption causes some changes to pension benefits in the 2011 ESP, RCS, and ESP+, benchmark runs. The changes in retirement income from this switch to buying deferred annuity contracts are very small: the average employer-sponsored pension benefit at age seventy rises by only 0.15 percent in a two-percent sample of the 2000 birth cohort. The social security benefits in the 2011 CBA and OLC benchmark runs are unchanged.
3. Add to the PENSIM ITBASE table three new income tax parameters that can be used to specify a variety of reforms in the federal income tax treatment of employer-sponsored defined-contribution (DC) pension plan contribution and benefits. The new ITBASE.dccon_tax parameter specifies whether or not DC plan contributions (by both the employee and the employer) are included in adjusted gross income (AGI). In prior model versions the value of this parameter was hard-wired to be false, which is current-law tax policy for traditional (that is, non-Roth) DC plans. The new ITBASE.dccon_cpct parameter specifies the refundable income tax credit rate applied to DC plan contributions made by both employee and employer. In prior model versions the value of this parameter was hard-wired to be zero, which is current-law tax policy. The new ITBASE.dcben_tax parameter specifies whether or not DC plan benefits are included in adjusted gross income (AGI). In prior model versions the value of this parameter was hard-wired to be true, which is current-law tax policy for traditional (that is, non-Roth) DC plans. The baseline values of these three new parameters are false, zero, and true. For more details read the enhanced documentation of the PENSIM ITBASE table.
4. Add to the PENSIM PACONT1 table a new parameter that specifies whether or not employee contribution rates to DC plan accounts are adjusted downward using factors from an SQLite database. For more details on this advanced feature read the enhanced documentation of the PENSIM PACONT1 table.
5. Add to supplement 1 of the PENSIM .xsa, .xsb, .xsc, .xsd, and .xse output results files, a new output statistic that measures the size of the prior refundable income tax credit for DC plan contributions. See the revised documentation for these five PENSIM output results files for details.
6. Add to supplement 4 of the GEMINI .xsa, .xsb, and .xsc output results files, new output statistics that measures the size of the refundable income tax credit for DC plan contributions, and the amount of employee and employer contributions to DC plans. See the revised documentation for these three GEMINI output results files for details on the new statistics.
7. Revise the content of the GEMINI .atx output results file so that it includes a real after-federal-income-tax family income per adult equivalent in the family at the specified STATS.atx_age. See the revised documentation of the GEMINI .atx output results file for information on the new file layout and the exact definition of the after-tax family income statistic.
8. Add to the PENSIM ITBASE table two new income tax parameters, ss_alt_tax and ss_alt_pct, that can be used to specify alternative policies regarding the income taxation of social security (OASDI) benefits. When true, the new ITBASE.ss_alt_tax parameter specifies a reform in which ITBASE.ss_alt_pct of OASDI benefits are included AGI for everybody regardless of income. When ITBASE.ss_alt_tax is false, the current-law policy for determining the fraction of OASDI benefits included in AGI is used. For more details read the enhanced documentation of the PENSIM ITBASE table.
9. Add to the PENSIM INCTAX table a new parameter that specifies which statistical series to use when indexing income tax parameters. The choice is between using the BLS CPI (as in current-law policy) and using the SSA AWI (average wage index). The latter may be preferable when simulating income taxes in the distant future and avoiding bracket creep is important. The baseline value of this parameter is true. For more details read the enhanced documentation of the PENSIM INCTAX table.
10. Revise the internal logic of PENSIM and GEMINI so that spouses of cohort sample individuals have the same id values in both PENSIM and GEMINI trace output. This enhancement, which brings to spouses the same consistency in id values between PENSIM and GEMINI as has been true for sample individuals for many years. This enhancement causes no changes to the substantive output results generated by the PSG models.
11. Add GEMINI .dct output results file, which is described in the revised documentation of the STATS table and new documentation for the .dct output file.