Retirement Plan Participation Stabilizing

As the economy slowly recovered from the recent recession, American workers’ participation in employment-based retirement plans stabilized, according to a new report by EBRI.

In 2011, the percentage of workers participating in an employment-based retirement plan was essentially unchanged from a year earlier. Specifically, the percentage of all workers (including part-year, part-time, and self-employed) participating in an employment-based retirement plan moved from 39.6 percent in 2009, to 39.8 percent in 2010, to 39.7 percent in 2011.

“The increase in the number of workers participating in 2011 halted the three year decline from 2008–2010,” said Craig Copeland, senior research associated at EBRI and author of the report. “The downturns in the economy and stock market in 2008 and into 2009 showed a two-year decline in both the number and percentage of workers participating in an employment-based retirement plan. The 2010 and 2011 participation levels stabilized as the economy recovered.”

As the EBRI report explains, the type of employment has a major impact on participation rates. Among full-time, full-year wage and salary workers ages 21–64 (those with the strongest connection to the work force), 53.7 percent participated. However, this rate varies significantly across various worker characteristics and the characteristics of their employers.

For instance, being nonwhite, younger, female, never married; having lower educational attainment, lower earnings, poorer health status, no health insurance through own employer; not working full time, full year, and working in service occupations or farming, fisheries, and forestry occupations were all associated with a lower level of participation in a retirement plan. Workers in the South and West were less likely to participate in a plan than those in other regions of the country.

The overall percentage of females participating in a plan was lower than that of males, but when controlling for work status or earnings, the female participation level actually surpasses that of males. The retirement plan participation gender gap significantly closed from 1987–2009 before slightly widening in 2010 and 2011.

Full results are published in the November 2012 EBRI Issue Brief, “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2011,” online at

The Good Old Days

By Nevin Adams, EBRI


There’s been a lot of talk lately about the need to fix the “broken” 401(k) plan. Some say it disproportionately benefits higher-paid workers, some claim it can’t provide a level of retirement income sufficient to meet lower-income needs, and still others maintain it can’t provide that level of security for anyone. And, as often as not, those sentiments arise as part of a discussion where folks wistfully talk about the “good old days” when everybody had a defined benefit pension, and people didn’t have to worry about saving for retirement.

Only problem is—those “good old days” never really existed, nor were they as good as we “remember” them.

Consider that only a quarter of those age 65 or older had pension income in 1975, the year after ERISA was signed into law. The highest level ever was the early 1990s, when fewer than 4 in 10 (both public- and private-sector workers) reported pension income, according to EBRI tabulations of the 1976–2011 Current Population Survey (in 2010, 34 percent had pension income).

Perhaps more telling is that that pension income, vital as it surely has been for some, represented just 20 percent of all the income received by those 65 and older in 2010. In the “good old days” of 1975, it was less than 15 percent.

In fact, in 1979, just 28 percent of private-sector workers were covered “only” by a defined benefit (DB) plan (another 10 percent were covered by both a DB and a defined contribution plan), according to Department of Labor Form 5500 Summaries. In other words, even in the “good old days” when “everybody” supposedly had a pension, the reality is that most workers in the private sector did not.

Even among those who did work for an employer that offered a pension, most in the private sector weren’t working long enough with a single employer to accumulate the service levels you need for a full pension. Nor is this a recent phenomenon; median job tenure of the total workforce has hovered about four years since the early 1950s (in fact, as EBRI’s latest research points out, the average median job tenure has now risen, to 5.2 years).¹ For private-sector workers, fewer than 1 in 5 have ever spent 25 years or more with one employer. Under pension accrual formulas, those kind of numbers mean that even among the workers who qualify for a pension, many are likely to receive a negligible amount because their job tenure is so short.

Ultimately what this suggests is that, even when defined benefit pensions were more prevalent than they are today, most Americans still had to worry about retirement income shortfalls.

Indeed, Americans today do have some additional concerns: longer lives and longer retirements to fund, as well as the attendant issues of higher health care costs and long-term care. For most workers—past and present—the more savings options they have, the better; and the easier we make it for them to save, the better. That is the power of payroll deduction, matching contributions, and employer action.

When all is said and done, we’re all still challenged to find the combination of funding—Social Security, personal savings, and employment-based retirement programs—to provide for a financially satisfying retirement.

Just like in the “good old days.”


See EBRI Notes, December 2010.

The Importance of Defined Benefit Plans for Retirement Income Adequacy

A new EBRI analysis shows that Baby Boomer and Generation X households that have a defined benefit (DB) pension plan accrual at retirement age are overall almost 12 percentage points less likely to be “at risk” of running short of money for basic needs and uninsured health costs in retirement.

The report finds that having a DB pension plan is particularly valuable for those with the lowest income in both age groups, but also has a “strong impact” on reducing at-risk rates for those in the middle class: Among those in the second- and third-income groups combined (covering middle-income workers), the combined relative at-risk reduction is almost 20 percent.

The press release is online here.

The full report is online here.