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• ~ improvements in benefits. Finally, when the .costs are once paid, they are paid for good. Several insurance companies offer private industry pension plans that have built-in cost-of-living adjustment provisions. Aetna Life offers a plan that bases cost-of- living adjustments on the Consumer Price Index (CPI). The maximum amount that retire- ment income may be increased annually is determined by the employer when the plan is instituted. Plans providing for maximum annual increases ranging from 2~ to 5~ are available as are plans with no maximum, For example, if an employer selects a 4p maximum and the CPI rises 3p, pension benefits will also be; increased 3~. If the CPI rises 4•~ or more, the full maximum increase in pension benefits will be made. Aside from the various plans that exists in the private realm, two of the largest government entities, the Federal Civil Service and the Military, have built-in cost- of-living adjustment provisions. An automatic adjustment will be given to all of the above retired employees, when the cost of living, based on the CPI, increases 3~ or over and remains at this level for three consecutive months. The adjustment is based on what the highest percentage cost-of-living increase was during that three month period. Therefore, if these circumstances do occur, the retired employee will be guaranteed at least a 3% adjustment. Many of the pension plans in private companies are based on profit sharing. Although cost-of-living adjustments are not an integral part of profit-sharing, it is certain that as inflationary trends continue, the value of the shares will also increase. The Sunday, March 10, Los Angeles TIMES ran a comprehensive story on pension funds with the fo-_lowing excerpts related to our present concern: Of the pensions aeaoti- ated by collective bargain- ing, the employer; pay full costs in E0;'o of the cases. About hvo-thirds of the unilateral plans are sup- ported by company contri- butions only. Contributions made to a pension fund kw a corpora- tion are a business es- pense and, themfore, can be deducted from income for tax purpo::es. The in- come from pension fund in~•estments is ta::-free. An empIoye's contribu- tion to a pension fund is part of his tasable income, ho:c•ever. His tax advan- tage comes when he gets his pcrsion since he does not have to pay tales on the income derived from his contribc,tions. He is supposed to pay tai: on the pension derived from his emplo::er's contril,ution, however. StanIev S. S;n•rey, a~~i=.- tant secretary of the trea- sury for to-e policy, e.~ti- mated that ti12 federal government In<c., about S3 billion a year from the tax shelter granted corporate pension payment :. To get this tas benefit for a pension plan, an employer must file a state- ment «•ith the Internal Revenue Service saying the plan is permanent, that the money- raises[ ~ci11 be u;eiI for the e~clusiye benefit of the eriploye~ and that the benefits paid mint not fa, or any one Group of ~rorfiers •over another in the same plan. The IRS has issue d about 10,000 fa~-orable rulin~~ on pension plans since 1931, t~•itlz the num- ber approved each year grocvir,g rapidly. In 196:, for instance, 1 x,533 ne«= plans were an;~roved. The number approved in 1967 was ?0,000. In enforcing its rues, the IP.S is chiefly con- cerned that companies do not divert teo much into pension funds or use the tax shelter to pay off one group of em~~loy-es at the ehpen~e of others. Lower Financing ':1lthouah no pub 1 i c funds are utilized directly to finance private pen- sion, practically- aII pri- vate plans hac-e met the qualifications for special incorr~e tax treatment," tiVirtz pointed out. "3s a result, a given pension systen: can be financed by a 30"0 lov: er rate of contri- butions." • F'or cot•pcratioris that choose to administer their own pension plans instead of turning them over to p r o f e~~ional managees, this tax advantage can pay bid dividends. -3 /,~