Study: Participation Rates Increase for Retirement Plans

October 12, 2004 ( - The number of employees participating in employment-based retirement plans grew in 2003, but is still significantly below the all-time high set in 2000.

According to the Employee Benefit Research Institute (EBRI), the portion of all workers enrolled in such plans rose to 42% in 2003, up 0.2% from the year before. The level for full-time, full-year employees aged 21 to 64 also grew, up to 57.1% from 56.7% for 2002.

The data, which is contained in the October EBRI Issue Brief, showed that in the public sector, enrollment was at its highest ever at 15.2 million. However, overall numbers were not quite as positive. Currently 63.5 million workers participate in such plans, down significantly from the all-time high of 67.1 million seen in 2000.

Education plays a key factor in participation rates, according to the EBRI data. The number of 21 to 64 year-olds without a high school diploma who were enrolled in employment-based plans in now at 21.9%, down significantly from the 1987 number of 31.5%. For those who completed high school but have no further education, the decline was less severe, with 42.6% participating now compared to 43.9% in 1987.

For those who complete college, however, participation rates have risen. Of those employees with a bachelor-level degree, 59.3% are currently participating in such plans, up over 7% since 1987. Of those with even more education, 69.8% participate, up from 65.6% in 1987. Not surprisingly, this correlates well with income levels; the only income group to show an increase in participation in 2003 included those whose income exceeded $50,000 annually. This group’s participation rate grew from 73.3% to 74.5%.

Participation rates show a gap between large and small employers. Between 1987 and 2003, small firms (25-99 employees) saw an increased participation rate – from 28.2% to 39.4% – but this rate still lags behind larger firms. Of companies with 100 to 500 employees, the level rose from 42.5% in 1987 to 49.4% in 2003. At the smallest firms (fewer than 10 employees), participation was only 16.5% in 2003. In stark contrast, at the largest employers (over 1,000 employees), the participation rate was 60.3%.

EBRI Chairman and President Dallas Salisbury noted that participation may be expected to increase in the coming years. “While the overall retirement participation level has stabilized, we’re seeing significant changes within subgroups. These numbers show that the economy drives participation in a retirement plan. A tightening labor market may drive participation higher in the years ahead,” Salisbury said in a press release.