Comparing DC Plan Behavior of For-Profit and Not-For-Profit Employees

December 14, 2010 ( – While a comparison of retirement savings behaviors of for-profit and not-for-profit employees found more similarities than differences, some key differences existed between not-for-profit market segments.

Among the sample of employees surveyed by LIMRA, two-thirds (67%) each of for-profit and not-for-profit employees offered a defined contribution plan participate and, on average, contribute 8% of their salaries. Controlling for the other factors, the presence of an employer match is the greatest motivator for an employee contributing to a DC plan – nearly tripling the odds an employee will participate.  

Twenty-six percent of not-for-profit employees and 43% of for-profit employees say they do not contribute to their DC plan because the plan does not offer a matching contribution. Employer matches are more common among for-profit employees (76% vs. 61% among not-for-profit employees).   

Not being able to afford to contribute is the most common reason cited by both for-profit (45%) and not-for-profit (39%) of employees for not contributing to their DC plans. More not-for-profit than for-profit employees cited saving for retirement in other ways (25% vs. 13%) and being covered by a defined benefit plan (22% vs. 8%) as reasons for not contributing to a DC plan.  

Around half of not-for-profit and for-profit employees own IRAs. More than half (54%) of not-for-profit employees reported they are covered by a DB plan, compared to 38% of for-profit employees.  

Retirement was the top reason cited for saving for both not-for-profit and for-profit employees (62% and 58%, respectively). Not-for-profit employees are more likely than for-profit employees to have an emergency or “rainy day” fund (67% and 62%, respectively).

Employer Segment Differences  

The analysis by LIMRA found that state and local government (62%) and education (63%) employees have the lowest DC plan participation rates, most likely due to lower employer match prevalence (51% and 60%, respectively, compared to 74% of hospital and health care organizations and 77% of for-profit businesses).   

Although nearly three in four hospital and health care employees have an employer match, their plan balances are the second lowest among employer segments. LIMRA says this may be because two thirds of hospital and health care employees are female –the highest proportion of any segment. The study found that although their participation rates are equal to those of men, women’s DC plan balances are significantly smaller. Half of women have $15,000 or less saved in their DC plan.  

Education employees have the highest average deferral rates (9.4%) as well as the highest average DC balance ($91,032). LIMRA says this is due to the inclusion of higher-education employees who tend to have higher salaries, higher employer matching contributions, and higher plan balances.  

In addition, education employees are the most likely to work with a paid professional to make some of their household investment decisions (34%), while state and local government employees are the least likely to do so (17%).  

The survey was fielded in July and August of 2010 among 1,238 not-for-profit employees and 1,255 for-profit employees.  

More about LIMRA and its research is at