This fact sheet provides data on the percentage of U.S. workers who have access to and who participate in employer-sponsored pension plans. The data are from the National Compensation Survey (NCS), conducted by the Bureau of Labor Statistics (BLS).¹

Worker Participation in Employer-Sponsored Pensions

A pension is a voluntary benefit offered by some employers in which employees and employers defer a portion of current wages to receive as income in retirement. Pension plans that meet the requirements specified in the Internal Revenue Code are called qualified plans and receive specified tax advantages.² Employers may offer two types of pension plans: defined benefit (DB) plans or defined contribution (DC) plans. (Some employers offer both.) Since the late 1980s and early 1990s, DC pension plans have been more common than DB pension plans.³

In DB pension plans, participants receive monthly payments in retirement that are based on a formula that typically uses either (1) a combination of length of service, accrual rate, and average of final years' salary or (2) a flat dollar amount times the number orof months or years in the plan. For example, a plan might specify that retirees receive an amount equal to 1.5% of their pay for each year of service, where the pay is the average of a worker's salary during his or her highest-paid five years.⁴

In DC plans—of which 401(k) plans, 403(b) plans, 457(b) plans, and the Thrift Savings Plan (TSP) are the most common—workers contribute a percentage of their wages to an individual account established by the employer. Employers may also contribute a match to the DC plan, which is an additional contributioncontribution equal to some or all of the worker's contribution. The account accrues investment returns and is then used as a basis for income in retirement.⁵

Table 1 contains both access and participation rates separately for workers in DB and DC plans (and for either plan). BLS indicates that employees are considered to have access to a benefit plan if it is available for their use and are considered participants if they have fulfilled any applicable service requirements and, where applicable, paid required contributions.

Not all workers who have access to a pension plan at work participate in the plan. In addition, the percentage of workers who participate in plans to which they have access differs between DB and DC plans. The take-up rate is defined as the percentage of workers who participate in a plan to which they have access. Because most DB plans are funded entirely from employer contributions, among workers thatwho have access to a DB plan, the take-up rate is 83%.⁶ Among workers thatwho have access to a DC plan, the take-up rate is 69%. Among the reasonsReasons for the lower take-up rates for DC plans compared with DB plans are as followsinclude the following: (1) until recently, workers had to make an active decision to participate in DC plans, which meant that workers might delay (and eventually forget about) the decision to participate,⁷ and (2) because DC plans are at least partially funded by employee contributions, some workers might prefer to receive the money as current wages rather than delay the income until they retire.⁸

The data in Table 1 are classified by a variety of attributes that highlight differences in pension plan participation rates among groups of workers. Key distinctions in the data include the following:

• A greater percentage of full-time workers have access to pension plans compared with part-time workers. Among part-time civilian workers, 3840% had access to a pension plan; among full-time civilian workers, 81% had access to a pension plan.⁹
• A greater percentage of state and local public-sector workers (91%) have access to pension plans compared with private-sector workers (6668%). State and local public-sector workers are more likely to have access to DB pension plans (86% compared with 1817%), whereas private-sector workers are more likely to have access to DC pension plans (6264% compared with 37%).¹⁰ In 2016, about 26% of state and local government workers did not participate in Social Security.¹¹
• Access rates are higher for workers in higher -paying occupations. For example, 4244% of private-sector workers in occupations with the lowest 25% of average wages participate in employer-sponsored pensions, whereas 8887% of workers in occupations inwith the highest 25% of average wages do.
• Access rates increase as the size of workers' firms increases. For example, 49% of private-sector workers in firms with fewer than 50 employees participate in employer-sponsored pensions, whereas 89% 88% of workers in firms with 500 or more employees do.

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Acknowledgments

Emma Sifre provided assistance in updating this report.

Footnotes