Workplace DC Offering Key to Retirement Readiness

April 22, 2011 ( - New research from the nonpartisan Employee Benefit Research Institute (EBRI) shows that being eligible to participate in a defined contribution retirement plan at work is a key factor in whether workers will have enough money to afford basic expenses and cover uninsured medical care in retirement.

According to a news release, the research finds the “at-risk” level declines the longer workers are eligible to participate in a work-based DC plan. For instance, looking at Gen Xer households (those born between 1965–1974) in the next-to-lowest income quartile, eligibility in a DC plan has a strong impact on retirement income adequacy: 58% of these households eligible for defined contribution plan participation less than one-quarter of future work years would be at risk at least 50% of the time, compared with only 21% for those eligible at least three-quarters of future work years, the news release said.  

EBRI’s analysis notes that retirement income adequacy in the future depends on a number of key factors, including among other things: the assumed retirement age, participation rates, employee contribution rates, employer matching formulae, employer non-elective contributions, asset allocation, job turnover, cashout rates, and rates of return.  

However, Jack VanDerhei, EBRI research director and author of the report, said: “A crucial factor in workers’ ability to achieve future retirement income adequacy is their eligibility to participate in a defined contribution plan.”  

The full report appears in the April 2011 EBRI Notes “Retirement Income Adequacy: Alternative Thresholds and the Importance of Future Eligibility in Defined Contribution Retirement Plans,” online at