Recent federal data offers heartening news about U.S. workers’ participation in retirement plans, according to a report from the Employee Benefit Research Institute, Washington.
EBRI found increases not only in the number of employers offering retirement plans but also in the percentage of employees who join and who become vested in their employers’ plans. The growth applied to workers in both the private and public sectors.
Among wage and salary workers over 16 years of age in nonagricultural industries, 63% worked for employers or unions sponsoring a retirement plan in 2003, up from 60% in 1998, according to an EBRI analysis of the latest U.S. Census Bureau compensation data.
Among all workers, 48% actually participated in a retirement plan, up from 44% five years earlier.
The vesting rate also was up, with 44% saying they were entitled to at least some pension benefit or lump sum distribution if they left their job, up from 41%.
Some of the vesting improvement was probably due to legal requirements that forced some employers to lower vesting periods, notes Craig Copeland, an EBRI analyst who wrote the study.
But another reason was that defined contribution plans have grown considerably. Copeland points out employees who contribute to their pensions are vested in their own contributions.
He found around 58% of workers identified a defined contribution plan as their primary retirement plan. This was up from 52% in 1998.
In contrast, around 41% said their main retirement vehicle was a defined benefit plan, down from about 46% five years earlier and 57% in 1988.
An average of 79% of those earning $50,000 or more took part in a retirement plan, compared to 45% of those making between $15,000 and $19,999. (Income figures were based on constant 1993 dollars.)
Surprisingly, those in the under-$5,000 bracket showed the most significant increase in participation. In 2003, 13% of those in this lowest income bracket were in a retirement plan, around the same as in 1998 but well up from only 4% in 1993.
Half of employers offered salary-reduction plans such as 401(k)s, EBRI found, up from 46% in 1998.