Survey: Pension Policy Needs to Encourage Plan Coverage, Participation

Continuing questions about how much Social Security benefits will contribute to workers’ retirement income make the availability of, and participation in, workplace savings programs all the more important. It will also require more retirees to continue working in some capacity.

“Successful efforts to expand participation in private pensions would make an important contribution to assuring that more workers could maintain their living standards in retirement,” concluded researchers Alicia Munnell, James Lee and Kevin Meme.

The study by the Center for Retirement Research at Boston College that was based on 1999 Form 5500 data and government surveys found that 2002 pension participation was lower across the board than it was in 1979. Some 51% of non-agricultural wage and salary workers, aged 25 to 64, in the private sector participated in a pension plan in 1979 while that number dropped to 46% by 2002, according to the study.

Researchers found that pension coverage for men reflected a sharp decline at all earnings levels while participation among women actually increased during the period. The decrease in male participation was due to the simultaneous drop in union membership and employment by large manufacturers while the trends for females were driven primarily by more women working full time, the study said.

Not surprisingly, participation patterns also differed by income level. In the top quintile of earnings, 65% to 70% of workers of both genders participated in pensions while that number plummeted to about 15% for men and 10% for women in the bottom earnings quintile.

The researchers also looked at the relationship between coverage (working for an employer offering a pension plan) versus actually pension participation. Of those without pension coverage, one fifth work for a company with a plan while four fifths are employed by a firm without a pension program. Nearly half of those not in their employer’s plan don’t meet the age and service requirements while another 5% couldn’t be in the plan because their job was excluded.

The report is available at http://www.bc.edu/centers/crr/issues/ib_20.pdf .