DC Plan Increase Charted

May 20, 2002 (PLANSPONSOR.com) - A recent industry study of retirement program trends found that the number of companies replacing their traditional pensions with defined contribution plans significantly increased between 1993 and 1998.

According to a report by Employee Benefit Research Institute (EBRI), the number of participants with defined contribution program as their primary plan jumped from 49.8% in 1993 to 62.7% in 1998. Also, some 35.1% said a defined benefit pension was their primary plan, down from 38.2% five years earlier and way down from the 1988 level of 56.7%.

Also in the May EBRI Issue Brief, were data showing the plan participation rates increased with age through age 50, and then dropped. According to the EBRI data, 7% of 16 to 20-year-old workers participated in a pension plan in 1998, while 60% of 41 to 50-year-olds did so. The participation rate then decreased, reaching a mere 23% for those age 65 or older.

In measuring the effect of income level, the EBRI data found that for those making less than $5,000 annually in constant 1993 dollars in 1998, 13% participated in a pension plan, compared with 75% of those making $50,000 or more in 1993 dollars.

The vesting rate increased from 24% in 1979 to 41% in 1993, and remained at 41% in 1998. The EBRI report said there are has been a trend toward faster vesting requirements since 1979.

The report is based primarily on the results from the pension and retirement plan topical module of the Survey of Income and Program Participation, which was fielded in 1998 and released by the US Census Bureau in February 2002.