BLS Data Shows Changing Landscape in Retirement Plan Coverage

According to a BLS report, in 2005, 60% of workers had access to some type of retirement plan. Of those offered a retirement plan, 85% participated in a defined benefit plan, defined contribution plan, or both. However, data shows a shift in the type of plans employees are participating in.

In 1992-93, 32% of private industry workers participated in a defined benefit plan, while 35% participated in a defined contribution plan. In 2005, the number participating in a defined contribution plan had increased to 42%, while the number participating in defined benefit plans had decreased to 21%. BLS attributes the shift to c hanges in employment (i.e. more part-time workers, less union workers), federal regulation of defined benefit plan funding, the rise of 401(k) plans, and a growing shift in responsibility toward the employee for retirement savings.

While savings and thrift plans with a 401(k) feature are the most common type of defined contribution plan, BLS found other types of DC plan are still being used. In 2003, 70% of those participating in a DC plan were covered by a thrift and savings plan, 21% participated in a profit sharing plan, and 11% participated in a money purchase pension plan.

To help boost participation in DC plans, plan provisions have changed. Employer match contributions are increasingly used to encourage participation. BLS data showed the most common employer match formula to be 50% of employee deferrals up to 6% of salary. In addition, automatic enrollment is the newest tool employers are using to boost participation. In 2003, 5% of those participating in a thrift and savings plan were in a plan with an automatic enrollment feature.

Employers are also giving participants more investment choices for their DC contributions. In 2002, a quarter of employees permitted to choose their own investments in DC plans had more than 10 investment choices. In 1993, only 6% of employees had seven or more investment choices.

Aside from the shift to DC, BLS noted an increase in the use of non-traditional plans such as cash balance or pension equity plans. BLS data indicates that in 1991 only 3% of those who participated in a DB plan were covered by a cash balance plan. By contrast, in 2000, 23% were covered by a cash balance plan. In 2003, two percent of DB participants were covered by a pension equity plan, the newest type of hybrid plan. A pension equity plan is similar to a cash balance plan, but differs in that it uses participants’ final salary in the calculation of benefits instead of using salary for each year of work.

BLS gathered its data from its National Compensation Survey (NCS). The most current incidence data is from the 2005 NCS. The most current plan provision data is from the 2003 NCS.

The BLS report is here .