Defying Demographics, Workers Opt Out of Pension Plan Participation

January 2, 2002 ( ? While a growing number of workers are eligible for pension plans, the percentage opting to participate is declining, according to new research by the nonpartisan Employee Benefit Research Institute (EBRI).

The study indicates that the percentage of workers who said they did not participate in a pension plan because of ineligibility decreased from 63.3% in 1995 to 56.6% six years later. However, the number that opted not to participate in a plan for which they were eligible increased from 25.1% to 31.1% over the same period.

Demographic Distinctions

And while all demographic groups experienced increases in the percentages of workers participating in a pension plan from 1995 to 2001, the research found that increases were smaller among minority groups.

EBRI notes that a leading factor in this discrepancy seems to be an increase in the percentage of eligible Hispanics and blacks who chose not to participate in the programs. For example, while in 1995 roughly 32% of blacks and a comparable percentage of Hispanics declined to participate, by 2001 those percentages had widened to 38.2% for blacks and 39.8% for Hispanics.

However, last year, 71.7% of whites worked for an employer sponsoring a plan, compared with just 47.2% of Hispanics.

Age Stages

In February 2001, more than two-thirds (67.8%) of wage and salary workers ages 21-64 worked for an employer that sponsored a pension plan, while over half (54.8%) participated in a pension plan, up 3.8 percentage points from February 1995.

The participation rates for workers between the ages of 21 and 34 grew faster than that of workers over age 35 from 1995 to 2001. Still, in 2001, the percentage of participating workers aged 45-54 was still twice that of those aged 21-24 ? 65.4% compared with 27.3%.

Nearly 60% of full-time workers participated in a pension plan in 2001, compared with just 37.2% of part-time workers who did so. Among full-time workers who worked for an employer sponsoring a plan, 36.6% opted not to participate, compared with less than one in five of part-timers.

Public Participation

The report also notes that among public-sector workers, 81.6% participated in a pension plan last year, compared with 49.4% of private-sector workers. Still, for private sector workers, that represents an increase from 44.5% in 1995, while the percentage of public-sector plan participants only increased from 80.1% six years earlier.

EBRI is a private, nonprofit, nonpartisan public policy research organization based in Washington, DC.