The Court today holds that an employer may not offer its employees life annuities from a private insurance company that uses actuarially sound, sex-based mortality tables. This holding will have a far-reaching effect on the operation of insurance and pension plans. Employers may be forced to discontinue offering life annuities, or potentially disruptive changes may be required in long-established methods of calculating insurance and pensions.1 Either course will work a *1096major change in the way the cost of insurance is determined — to the probable detriment of all employees. This is contrary to our explicit recognition in Los Angeles Dept. of Water & Power v. Manhart, 435 U. S. 702, 717 (1978), that Title VII “was [not] intended to revolutionize the insurance and pension industries.”
I
The State of Arizona provides its employees with a voluntary pension plan that allows them to defer receipt of a portion of their compensation until retirement. If an employee chooses to participate, an amount designated by the employee is withheld from each paycheck and invested by the State on the employee’s behalf. When an employee retires, he or she may receive the amount that has accrued in one of three ways. The employee may withdraw the total amount accrued, arrange for periodic payments of a fixed sum for a fixed time, or use the accrued amount to purchase a life annuity.
There is no contention that the State’s plan discriminates between men and women when an employee contributes to the fund. The plan is voluntary and each employee may contribute as much as he or she chooses. Nor does anyone contend that either of the first two methods of repaying the accrued amount at retirement is discriminatory. Thus, if Arizona had adopted the same contribution plan but provided only the first two repayment options, there would be no dispute that its plan complied with Title VII of the Civil Rights
*1097Act of 1964, as amended, 42 U. S. C. § 2000e et seq. (1976 ed. and Supp. V). The first two options, however, have disadvantages. If an employee chooses to take a lump-sum payment, the tax liability will be substantial.2 The second option ameliorates the tax problem by spreading the receipt of the accrued amount over a fixed period of time. This option, however, does not guard against the possibility that the finite number of payments selected by the employee will fail to provide income for the remainder of his or her life.
The third option — the purchase of a life annuity — resolves both of these problems. It reduces an employee’s tax liability by spreading the payments out over time, and it guarantees that the employee will receive a stream of payments for life. State law prevents Arizona from accepting the financial uncertainty of funding life annuities. Ariz. Rev. Stat. Ann. § 38-871(C)(l) (Supp. 1982-1983). But to achieve tax benefits under federal law, the life annuity must be purchased from a company designated by the retirement plan. Rev. Rul. 72-25, 1972-1 Cum. Bull. 127; Rev. Rul. 68-99, 1968-1 Cum. Bull 193. Accordingly, Arizona contracts with private insurance companies to make life annuities available to its employees. The companies that underwrite the life annuities, as do the vast majority of private insurance companies in the United States, use sex-based mortality tables. Thus, the only effect of Arizona’s third option is to allow its employees to purchase at a tax saving the same annuities they otherwise would purchase on the open market.
The Court holds that Arizona’s voluntary plan violates Title VII. In the majority’s view, Title VII requires an employer to follow one of three courses. An employer must provide unisex annuities itself, contract with insurance companies to provide such annuities, or provide no annuities to its employees. Ante, at 1091 (Marshall, J., concurring in judgment in part). The first option is largely illusory. Most *1098employers do not have either the financial resources or administrative ability to underwrite annuities. Or, as in this case, state law may prevent an employer from providing annuities. If unisex annuities are available, an employer may contract with private insurance companies to provide them. It is stipulated, however, that the insurance companies with which Arizona contracts do not provide unisex annuities, nor do insurance companies generally underwrite them. The insurance industry either is prevented by state law from doing so3 or it views unisex mortality tables as actuarially unsound. An employer, of course, may choose the third option. It simply may decline to offer its employees the right to purchase annuities at a substantial tax saving. It is difficult to see the virtue in such a compelled choice.
1 — 1 I — 1
As indicated above, the consequences of the Court’s holding are unlikely to be beneficial. If the cost to employers of offering unisex annuities is prohibitive or if insurance carriers choose not to write such annuities, employees will be denied the opportunity to purchase life annuities — concededly the most advantageous pension plan — at lower cost.4 If, alternatively, insurance carriers and employers choose to offer these annuities, the heavy cost burden of equalizing benefits probably will be passed on to current employees. There is *1099no evidence that Congress intended Title VII to work such a change. Nor does Manhart support such a sweeping reading of this statute. That case expressly recognized the limited reach of its holding — a limitation grounded in the legislative history of Title VII and the inapplicability of Title VII’s policies to the insurance industry.
A
We were careful in Manhart to make clear that the question before us was narrow. We stated: “All that is at issue today is a requirement that men and women make unequal contributions to an employer-operated pension fund.” 435 U. S., at 717 (emphasis added). And our holding was limited expressly to the precise issue before us. We stated that “[although we conclude that the Department’s practice violated Title VII, we do not suggest that the statute was intended to revolutionize the insurance and pension industries.” Ibid.
The Court in Manhart had good reason for recognizing the narrow reach of Title VII in the particular area of the insurance industry. Congress has chosen to leave the primary responsibility for regulating the insurance industry to the respective States. See McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U. S. C. § 1011 et seq.5 This Act reflects the *1100long-held view that the “continued regulation ... by the several States of the business of insurance is in the public interest.” 15 U. S. C. § 1011; see SEC v. National Securities, Inc., 393 U. S. 453, 458-459 (1969). Given the consistent policy of entrusting insurance regulation to the States, the majority is not justified in assuming that Congress intended in 1964 to require the industry to change longstanding actuarial methods, approved over decades by state insurance commissions.6
*1101Nothing in the language of Title VII supports this preemption of state jurisdiction. Nor has the majority identified any evidence in the legislative history that Congress con*1102sidered the widespread use of sex-based mortality tables to be discriminatory or that it intended to modify its previous grant by the McCarran-Ferguson Act of exclusive jurisdiction to the States to regulate the terms of protection offered by insurance companies. Rather, the legislative history indicates precisely the opposite.
The only reference to this issue occurs in an explanation of the Act by Senator Humphrey during the debates on the Senate floor. He stated that it was “unmistakably clear” that Title VII did not prohibit different treatment of men and women under industrial benefit plans.7 See 110 Cong. Rec. 13663-13664 (1964). As we recognized in Manhart, “[although he did not address differences in employee contributions based on sex, Senator Humphrey apparently assumed that the 1964 Act would have little, if any, impact on existing pension plans.” 435 U. S., at 714. This statement *1103was not sufficient, as Manhart held, to preclude the application of Title VII to an employer-operated plan. See ibid. But Senator Humphrey’s explanation provides strong support for Manhart’s recognition that Congress intended Title VII to have only that indirect effect on the private insurance industry.
B
As neither the language of the statute nor the legislative history supports its holding, the majority is compelled to rely on its perception of the policy expressed in Title VII. The policy, of course, is broadly to proscribe discrimination in employment practices. But the statute itself focuses specifically on the individual and “precludes treatment of individuals as simply components of a racial, religious, sexual, or national class.” Id., at 708. This specific focus has little relevance to the business of insurance. See id., at 724 (Black-mun, J., concurring in part and concurring in judgment). Insurance and life annuities exist because it is impossible to measure accurately how long any one individual will live. Insurance companies cannot make individual determinations of life expectancy; they must consider instead the life expectancy of identifiable groups. Given a sufficiently large group of people, an insurance company can predict with considerable reliability the rate and frequency of deaths within the group based on the past mortality experience of similar groups. Title VII’s concern for the effect of employment practices on the individual thus is simply inapplicable to the actuarial predictions that must be made in writing insurance and annuities.
C
The accuracy with which an insurance company predicts the rate of mortality depends on its ability to identify groups with similar mortality rates. The writing of annuities thus requires that an insurance company group individuals according to attributes that have a significant correlation with mortality. The most accurate classification system would be to *1104identify all attributes that have some verifiable correlation with mortality and divide people into groups accordingly, but the administrative cost of such an undertaking would be prohibitive. Instead of identifying all relevant attributes, most insurance companies classify individuals according to criteria that provide both an accurate and efficient measure of longevity, including a person’s age and sex. These particular criteria are readily identifiable, stable, and easily verifiable. See Benston, The Economics of Gender Discrimination in Employee Fringe Benefits: Manhart Revisited, 49 U. Chi. L. Rev. 489, 499-501 (1982).
It is this practice — the use of a sex-based group classification — that the majority ultimately condemns. See ante, at 1083-1086 (Marshall, J., concurring in judgment in part). The policies underlying Title VII, rather than supporting the majority’s decision, strongly suggest — at least for me — the opposite conclusion. This remedial statute was enacted to eradicate the types of discrimination in employment that then were pervasive in our society. The entire thrust of Title VII is directed against discrimination — disparate treatment on the basis of race or sex that intentionally or arbitrarily affects an individual. But as Justice Blackmun has stated, life expectancy is a “nonstigmatizing factor that demonstrably differentiates females from males and that is not measurable on an individual basis. . . . [T]here is nothing arbitrary, irrational, or ‘discriminatory’ about recognizing the objective and accepted . . . disparity in female-male life expectancies in computing rates for retirement plans.” Manhart, 435 U. S., at 724 (concurring in part and concurring in judgment). Explicit sexual classifications, to be sure, require close examination, but they are not automatically invalid.8 Sex-based mortality tables reflect objective actuarial experience. Because their use does not entail discrimination in any *1105normal understanding of that term,9 a court should hesitate to invalidate this long-approved practice on the basis of its own policy judgment.
Congress may choose to forbid the use of any sexual classifications in insurance, but nothing suggests that it intended to do so in Title VII. And certainly the policy underlying Title VII provides no warrant for extending the reach of the statute beyond Congress’ intent.
I — I 1 — 1 HH
The District Court held that Arizona’s voluntary pension plan violates Title VII and ordered that future annuity payments to female retirees be made equal to payments received by similarly situated men.10 486 F. Supp. 645 (Ariz. 1980). The Court of Appeals for the Ninth Circuit affirmed. 671 F. 2d 330 (1982). The Court today affirms the Court of Appeals’ judgment insofar as it holds that Arizona’s voluntary pension plan violates Title VII. But this finding of a statutory violation provides no basis for approving the retroactive relief awarded by the District Court. To approve this award would be both unprecedented and manifestly unjust.
We recognized in Manhart that retroactive relief is normally appropriate in the typical Title VII case, but concluded that the District Court had abused its discretion in awarding such relief. 435 U. S., at 719. As we noted, the employer in Manhart may well have assumed that its pension program was lawful. Id., at 720. More importantly, a retroactive *1106remedy would have had a potentially disruptive impact on the operation of the employer’s pension plan. The business of underwriting insurance and life annuities requires careful approximation of risk. Id., at 721. Reserves normally are sufficient to cover only the cost of funding and administering the plan. Should an unforeseen contingency occur, such as a drastic change in the legal rules governing pension and insurance funds, both the insurer’s solvency and the insured’s benefits could be jeopardized. Ibid.
This case presents no different considerations. Manhart did put all employer-operated pension funds on notice that they could not “requir[e] that men and women make unequal contributions to [the] fund,” id., at 717, but it expressly confirmed that an employer could set aside equal contributions and let each retiree purchase whatever benefit his or her contributions could command on the “open market,” id., at 718. Given this explicit limitation, an employer reasonably could have assumed that it would be lawful to make available to its employees annuities offered by insurance companies on the open market.
As in Manhart, holding employers liable retroactively would have devastating results. The holding applies to all employer-sponsored pension plans, and the cost of complying with the District Court’s award of retroactive relief would range from $817 to $1,260 million annually for the next 15 to 30 years.11 Department of Labor Cost Study 32. In this case, the cost would fall on the State of Arizona. Presumably other state and local governments also would be affected directly by today’s decision. Imposing such unanticipated *1107financial burdens would come at a time when many States and local governments are struggling to meet substantial fiscal deficits. Income, excise, and property taxes are being increased. There is no justification for this Court, particularly in view of the question left open in Manhart, to impose this magnitude of burden retroactively on the public. Accordingly, liability should be prospective only.12
The cost of continuing to provide annuities may become prohibitive. The minimum additional cost necessary to equalize benefits prospectively would range from $85 to $93 million each year for at least the next 15 years. U. S. Dept, of Labor, Cost Study of the Impact of an Equal Benefits Rule *1096on Pension Benefits 4 (1983) (hereinafter Department of Labor Cost Study). This minimum cost assumes that employers will be free to use the least costly method of adjusting benefits. This assumption may be unfounded. If employers are required to “top up” benefits — i. e., calculate women’s benefits at the rate applicable to men rather than apply a unisex rate to both men and women — the cost of providing purely prospective benefits would range from $428 to $676 million each year for at least the next 15 years. Id., at 31. No one seriously suggests that these costs will not be passed on — in large part — to the annuity beneficiaries or, in the case of state and local governments, to the public.
The employee will be required to include the entire amount received as income. See 26 U. S. C. §457 (1976 ed., Supp. V); Rev. Rul. 68-99, 1968-1 Cum. Bull 193.
See Cal. Ins. Code Ann. § 790.03(f) (West Supp. 1983) (requiring differentials based on the sex of the individual insured); Spirt v. Teachers Insurance & Annuity Assn., 691 F. 2d 1054, 1066 (CA2 1982) (noting that State of New York has disapproved certain uses of unisex rates), vacated and remanded, post, p. 1223.
This is precisely what has happened in this case. Faced with the liability resulting from the Court of Appeals’judgment, the State of Arizona discontinued making life annuities available to its employees. Tr. of Oral Arg. 8. Any employee who now wishes to have the security provided by a life annuity must withdraw his or her accrued retirement savings from the state pension plan, pay federal income tax on the amount withdrawn, and then use the remainder to purchase an annuity on the open market — which most likely will be sex-based. The adverse effect of today’s holding apparently -will fall primarily on the State’s employees.
When this Court held for the first time that the Federal Government had the power to regulate the business of insurance, see United States v. South-Eastern Underwriters Assn., 322 U. S. 533 (1944) (holding the antitrust laws applicable to the business of insurance), Congress responded by passing the McCarran-Ferguson Act. As initially proposed, the Act had a narrow focus. It would have provided only: “ ‘That nothing contained in the Act of July 2,1890, as amended, known as the Sherman Act, or the Act of October 15, 1914, as amended, known as the Clayton Act, shall be construed to apply to the business of insurance or to acts in the conduct of that business or in any wise to impair the regulation of that business by the several States.’” S. Rep. No. 1112, 78th Cong., 2d Sess., pt. 1, p. 2 (1944) (quoting proposed Act). This narrow version, however, was not accepted.
Congress subsequently proposed and adopted a much broader bill. It recognized, as it previously had, the need to accommodate federal antitrust *1100laws and state regulation of insurance. See H. R. Rep. No. 143, 79th Cong., 1st Sess., 3 (1945). But it also recognized that the decision in South-Eastern Underwriters Assn, had raised questions as to the general validity of state laws governing the business of insurance. Some insurance carriers were reluctant to comply with state regulatory authority, fearing liability for their actions. See H. R. Rep. No. 143, at 2. Congress thus enacted broad legislation “so that the several States may know that the Congress desires to protect the continued regulation ... of the business of insurance by the several States.” Ibid.
The McCarran-Ferguson Act, as adopted, accordingly commits the regulation of the insurance industry presumptively to the States. The introduction to the Act provides that “silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of [the] business [of insurance] by the several States.” 15 U. S. C. § 1011. Section 2(b) of the Act further provides: “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . .. unless such Act specifically relates to the business of insurance.” 15 U. S. C. § 1012(b).
Most state laws regulating insurance and annuities explicitly proscribe “unfair discrimination between individuals in the same class.” Bailey, Hutchinson, & Narber, The Regulatory Challenge to Life Insurance Classification, 25 Drake L. Rev. 779, 783 (1976) (emphasis omitted). Arizona insurance law similarly provides that there shall be “[no] unfair discrimination between individuals of the same class.” Ariz. Rev. Stat. Ann. § 20-448 (Supp. 1982-1983). Most States, including Arizona, have determined that the use of actuarially sound, sex-based mortality tables comports with this state definition of discrimination. Given the provision of the McCarran-Ferguson Act that Congress intends to supersede state insurance regulation only when it enacts laws that “specifically relat[e] to the business of insurance,” see n. 5, swpra, the majority offers no satisfactory *1101reason for concluding that Congress intended Title VII to pre-empt this important area of state regulation.
The majority states that the McCarran-Ferguson Act is not relevant because the" petitioners did not raise the issue in their brief. See ante, at 1087-1088, n. 17 (Marshall, J., concurring in judgment in part). This misses the point. The question presented is whether Congress intended Title VII to prevent employers from offering their employees — pursuant to state law — actuarially sound, sex-based annuities. The McCarran-Ferguson Act is explicitly relevant to determining congressional intent. It provides that courts should not presume that Congress intended to supersede state regulation of insurance unless the Act in question “specifically relates to the business of insurance.” See n. 5, supra. It therefore is necessary to consider the applicability of the McCarran-Ferguson Act in determining Congress’ intent in Title VII. This presents two questions: whether the action at issue under Title VII involves the “business of insurance” and whether the application of Title VII would “invalidate, impair, or supersede” state law.
No one doubts that the determination of how risk should be spread among classes of insureds is an integral part of the “business of insurance.” See Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205, 213 (1979); SEC v. Variable Annuity Life Ins. Co., 359 U. S. 65, 73 (1959). The majority argues, nevertheless, that the McCarran-Ferguson Act is inapposite because Title VII will not supersede any state regulation. Because Title VII applies to employers rather than insurance carriers, the majority asserts that its view of Title VII will not affect the business of insurance. See ante, at 1087-1088, n. 17 (MARSHALL, J., concurring in judgment in part). This formalistic distinction ignores self-evident facts. State insurance laws, such as Arizona’s, allow employers to purchase sex-based annuities for their employees. Title VII, as the majority interprets it, would prohibit employers from purchasing such annuities for their employees. It begs reality to say that a federal law that thus denies the right to do what state insurance law allows does not “invalidate, impair, or supersede” state law. Cf. SEC v. Variable Annuity Life Ins. Co., supra, at 67. The majority’s interpretation of Title VII — to the extent it banned the sale of actuarially sound, sex-based annuities — effectively would pre-empt state regulatory authority. In my view, the commands of the McCarran-Ferguson Act are directly relevant to determining Congress’ intent in enacting Title VII.
Senator Humphrey’s statement was based on the adoption of the Bennett Amendment, which incorporated the affirmative defenses of the Equal Pay Act, 77 Stat. 56, 29 U. S. C. § 206(d), into Title VII. See County of Washington v. Gunther, 452 U. S. 161, 175, n. 15 (1981). Although not free from ambiguity, the legislative history of the Equal Pay Act provides ample support for Senator Humphrey’s interpretation of that Act. In explaining the Equal Pay Act’s affirmative defenses, the Senate Report on that statute noted that pension costs were “higher for women than men . . . because of the longer life span of women.” S. Rep. No. 176, 88th Cong., 1st Sess., 4 (1963). It then explained that the question of additional costs associated with employing women was one “that can only be answered by an ad hoc investigation.” Ibid. Thus, it concluded that where it could be shown that there were in fact higher costs for women than men, an exception to the Equal Pay Act could be permitted “similar to those ... for a bona fide seniority system or other exception noted above.” Ibid.
Even if other meanings might be drawn from the Equal Pay Act’s legislative history, the crucial question is how Congress viewed the Equal Pay Act in 1964 when it incorporated it into Title VII. The only relevant legislative history that exists on this point demonstrates unmistakably that Congress perceived — with good reason — that “the 1964 Act [Title VII] would have little, if any, impact on existing pension plans.” Los Angeles Dept. of Water & Power v. Manhart, 435 U. S. 702, 714 (1978).
Title YII does not preclude the use of all sex classifications, and there is no reason for assuming that Congress intended to do so in this instance. See n. 7, supra.
Indeed, if employers and insurance carriers offer annuities based on unisex mortality tables, men as a class will receive less aggregate benefits than similarly situated women.
As Justice Marshall notes, the relief awarded by the District Court is fundamentally retroactive in nature. See ante, at 1092 (concurring in judgment in part). Annuity payments are funded by the employee’s past contributions and represent a return on those contributions. In order to provide women with the higher level of periodic payments ordered by the District Court, the State of Arizona would be required to fund retroactively the deficiency in past contributions made by its women retirees.
The cost to employers of equalizing benefits varies according to three factors: (i) whether the plan is a defined-contribution or a defined-benefit plan; (ii) whether benefits are to be equalized retroactively or prospectively; and (iii) whether the insurer may reallocate resources between men and women by applying unisex rates to existing reserves or must top up women’s benefits. The figures in text assume, as the District Court appeared to hold, see 486 F. Supp. 645, 652 (Ariz. 1980), that employers would be required to top up women’s benefits.
In this respect, I agree with Justice O’Connor that only benefits derived from contributions collected after the effective date of the judgment need be calculated without regard to the sex of the employee. See post, at 1111 (O’Connor, J., concurring).