Order Code RL30122
CRS Report for Congress
Received through the CRS Web
Pension Sponsorship and Participation:
Summary of Recent Trends
Updated October 4, 2001
Patrick J. Purcell
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Pension Sponsorship and Participation:
Summary of Recent Trends
Summary
In order to help workers prepare for retirement, Congress has granted tax
exemptions or deferrals for income set aside in pension plans and retirement savings
accounts. Efforts to promote wider pension coverage by offering incentives to
employers and employees through the tax code generally have been successful,
especially for workers employed in medium and large firms. According to the Bureau
of Labor Statistics, 79% of full-time employees in medium and large private
establishments participated in an employer-sponsored pension or retirement savings
plan in 1997. Pension participation in small businesses, however, has lagged behind
the rates achieved in larger firms. In 1996, only 42% of full-time employees in
businesses with fewer than 100 employees participated in an employer-sponsored
pension or retirement savings plan.
The low rates of sponsorship and participation in retirement plans among small
businesses have prompted Congress to seek to reduce the number of obstacles that
impede pension coverage in these firms. For example, Congress has authorized
retirement plans for small employers with fewer reporting requirements and less
stringent contribution rules than are imposed on larger employers. Evaluating the
effect of these laws on pension coverage is complicated by the many other variables
that affect a firm’s decision to sponsor a retirement plan and a worker’s decision to
participate in the plan. Nevertheless, data on pension coverage collected in recent
national surveys of employers and households can be used to establish a baseline
against which future changes in coverage can be measured. Recent surveys of
employers and households reveal that:
! Pension participation remained steady in medium and large firms during the
1990s, while it rose in firms with fewer than 100 employees.
! Despite recent increases in coverage, employees in firms with fewer than 100
employees are only about half as likely as employees in larger firms to be
participants in an employer-sponsored pension or retirement savings plan.
! In 2000, there was relatively little difference in the rate of pension participation
among men and women who worked year-round, full-time (59% vs. 56%,
respectively).
! In 2000, only 50% of workers 25 to 34 years old participated in an employer-
sponsored pension or retirement savings plan, versus 60% of workers 35 or
older.
! Pension participation rose among white and other nonwhite workers in the
1990s, but fell slightly among African-American workers.
! Between 1991 and 2000, the percentage of full-time workers earning less than
$20,000 per year (in 2000 $) whose employer sponsored a retirement plan rose
from 35% to 42%, but only 28% of workers earning under $20,000
participated in an employer-sponsored retirement plan in 2000.
! Part-year or part-time workers are much less likely than workers employed
year-round, full-time to be participants in an employer-sponsored pension or
retirement savings plan (27% vs. 58% in 2000).

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Contents
Background on Pension Policy and Coverage Issues . . . . . . . . . . . . . . . . . 1
Congress and Retirement Income Policies . . . . . . . . . . . . . . . . . . . . . 2
The Locus of Risk in DB and DC Plans . . . . . . . . . . . . . . . . . . . . . . . 4
Simplified Defined Benefit Plans for Small Employers:
The “SAFE” and “SMART” Proposals . . . . . . . . . . . . . . . . . . . . . . . . 7
Recent Trends in Coverage by Employer-Sponsored Pension Plans . . . . . . 8
Data Collected from Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Medium and Large Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Small Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Pension Plan Financial Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Data Collected from Households . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pension Participation by Size of Employer . . . . . . . . . . . . . . . . . . . . 12
Pension Participation by Employee Gender . . . . . . . . . . . . . . . . . . . . 14
Pension Participation by Employee Age . . . . . . . . . . . . . . . . . . . . . . 15
Employee Pension Participation by Race . . . . . . . . . . . . . . . . . . . . . 17
Pension Participation by Employee Earnings . . . . . . . . . . . . . . . . . . . 18
Pension Participation by Full-time vs. Part-time Employment . . . . . . 20
Policy Implications: Promoting Savings and Plan Sponsorship . . . . . . . . . 21
Promoting Retirement Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Promoting Plan Sponsorship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Appendix: Sources of Pension Coverage Data . . . . . . . . . . . . . . . . . . . . . . . . . 24
The IRS Form 5500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Surveys of Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Surveys of Households . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
List of Tables
Table 1. Participation in Employer-Sponsored Pension or Retirement
Savings Plans in Medium and Large Private Establishments . . . . . . . . . . . . 9
Table 2. Participation in Employer-Sponsored Pension or Retirement
Savings Plans in Small, Independently Owned Businesses . . . . . . . . . . . . . 10
Table 3. Participation in Retirement Plans by Size of Firm . . . . . . . . . . . . . . . . 13
Table 4. Participation in Retirement Plans by Employee Gender . . . . . . . . . . . 14
Table 5. Participation in Retirement Plans by Employee Age . . . . . . . . . . . . . . 16
Table 6. Participation in Retirement Plans by Employee Race . . . . . . . . . . . . . 17
Table 7. Participation in Retirement Plans by Annual Earnings . . . . . . . . . . . . 19
Table 8. Participation in Pension or Retirement Savings Plans
by Full-Time vs. Part-Time Employment . . . . . . . . . . . . . . . . . . . . . . . . 21

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Pension Sponsorship and Participation:
Summary of Recent Trends
Background on Pension Policy and Coverage Issues
The aging of the American population has made retirement income an issue of
increasing concern to the Congress and the public. Americans are living longer than
ever before, and although they are living longer, many are retiring earlier. Moreover,
while the nation’s population continues to grow, the decline in birth rates that
followed the post-World War II “baby boom” coupled with longer life spans will
result in fewer workers relative to the number of retirees. This will place significant
fiscal strains over the next several decades on programs like Social Security and
Medicare that provide benefits mainly to the elderly. All of these trends will affect the
economic well-being of future retirees. Pensions and Social Security benefits will be
paid over longer periods of time; savings will have to be stretched over longer
retirements; and Social Security payments and Medicare benefits will have to be
financed by a working population that is shrinking relative to the number of retirees.
Americans are living longer then ever before. The average life
expectancy of Americans born in 1960 was 69.7 years. It has been estimated that
those who were born in 2000 will live for an average of 76.4 years.1 A man who
reached age 65 in 1960 could expect to live another 13 years, while a woman who
turned 65 had a remaining life expectancy of 16 years. A man who reached age 65
in 2000 could expect to live another 15.6 years, while a woman who turned 65 in
2000 had a remaining life expectancy of 19.4 years. As more people live into old age,
the age-profile of the population will shift. In 1960, 16.7 million people in the United
States — 9.2% of the population — were age 65 or older. In 1999, there were 34.5
million Americans age 65 or older, representing 12.7% of the population. By 2025,
according to projections made by the Bureau of the Census, there will be 62 million
people age 65 or older, comprising 18.5% of the U.S. population.
Working men are retiring earlier. Between 1970 and 2000, the proportion
of men aged 55 to 64 years old who were participating in the labor force fell from
83% to 66%.2 As a result of longer lives and earlier retirements, the length of
retirements is being stretched at both ends. Earlier retirements and longer life-spans
mean that the number of years spent in retirement, and thus the number of years
during which income must be derived mainly form sources other than current
employment, are increasing.
1U.S. National Center for Health Statistics, Vital Statistics of the United States.
2Among women 55-64 years old, the labor force participation rate rose during this period from
43% to 52%. Overall, labor force participation among persons ages 55 to 64 fell from 62%
in 1970 to 59.0% in 2000. (Source: CRS analysis of the Current Population Survey.)

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CRS-2
Families are smaller than they were in the 1950s and 1960s. The
decline in birth rates that followed the post-World War II “baby boom” may have an
impact on the income of retirees in the first decades of the 21st century.3 Birth rates
fell sharply between 1960 and 1975 and have remained low since then. In 1960, there
were 118 births per 1,000 women between the ages of 15 and 44. By 1975, the birth
rate had fallen to 66 per 1,000 women of child-bearing age, and from that year
through 1998 it never exceeded 70 births per 1,000 women.4 Social Security faces
long-term financial difficulties in part because of the declining ratio of workers to
retirees. In 1960, there were 5.7 working-age people (20-64) for every person age
65 or older. By 1999, the ratio of working-age people to those age 65 or older had
fallen to 4.6. According to the U.S. Bureau of the Census, by 2025 the ratio of
working-age people to people age 65 or older will have fallen to 3.0. As Social
Security is currently financed, fewer workers paying taxes will mean that tax rates
must be increased or benefits must be reduced.
Congress and Retirement Income Policies. The demographic trends
described above will place strains on the components of the traditional “three-legged
stool” of retirement income: Social Security, pensions, and personal saving. The
Congress is currently considering a wide range of proposals to revise and reform
Social Security in response to estimates by the system’s Board of Trustees that Social
Security will be financially insolvent by 2038.5 Because Social Security benefits are
financed through a federally-administered system of payroll taxes, it has always been
a subject of great interest to the Congress. Social Security is also the largest single
source of income among older Americans. Social Security pays benefits to more than
90% of people who are age 65 or older, and nearly two-thirds of the program’s
beneficiaries receive more than half of their income from Social Security.6
Social Security is the most significant source of income among the elderly,
providing 38% of all income received by Americans age 65 or older in 1999.
Pensions and savings are also important sources of income to retirees. In 1999,
pensions provided 18% of all income received by the elderly, while interest and
dividends comprised 19% of elderly income.7 By granting tax exemptions and
deferrals, Congress has had a major role in helping workers prepare for retirement by
encouraging participation in pension plans and retirement savings accounts.
The Internal Revenue Code was first amended to provide favorable tax treatment
for qualifying pension and retirement plans in the 1920s. These provisions have been
expanded and modified many times since then. Among the tax exemptions that apply
to traditional “defined benefit” pension plans are the deduction of pension
3The Census Bureau defines the baby boom to include the years from 1946 to 1964.
4In 1998, there were 65 live births per 1,000 women 15 to 44 years old. U.S. National Center
for Health Statistics, Vital Statistics of the United States.
5Social Security and Medicare Boards of Trustees, Status of the Social Security and
Medicare Programs: A Summary of the 2001 Annual Reports, Washington, DC, March
2001.
6SSA, Office of Policy, Fast Facts and Figures About Social Security, June 2001.
7SSA, Office of Policy, Fast Facts and Figures About Social Security, June 2001.

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CRS-3
contributions from employer income, exclusion of employer contributions to pension
plans from employee income, and tax exemption of the earnings of pension trusts.8
In “defined contribution” plans such as those authorized under section 401(k) of the
tax code, income taxes are deferred until retirement on employer and employee
contributions to the plan and on the investment earnings of the plan.
By establishing the tax-favored status of pension programs and defining the
terms under which tax exemptions and deductions are granted, federal tax law has
both encouraged the growth of pension coverage among workers and shaped the
development of pension and retirement savings plans. Congress also has sought to
protect the pension benefits earned by workers through direct regulation of pension
plans, most notably through the Employee Retirement Income Security Act of 1974
(P.L. 93-406). ERISA, too, may have influenced the development of employer-
sponsored retirement plans. Since its enactment, defined contribution (DC) plans
have proliferated while the number of defined benefit (DB) plans has been falling.
Two Kinds of Retirement Plans: Defined Benefit and Defined Contribution
Retirement programs are legally classified as either defined benefit plans or
defined contribution plans. In defined benefit or “DB” plans, the retirement benefit
usually is based on an employee’s salary and number of years of service. With each
year of service, a worker accrues a benefit equal to either a fixed dollar amount per
month or year of service or a percentage of his or her final pay or average pay.
A defined contribution or “DC” plan is much like a savings account maintained
by the employer on behalf of each participating employee. The employer contributes
a specific dollar amount or percentage of pay into the account, which is usually
invested in stocks and bonds. In some plans, the size of the employer’s contribution
depends on the amount the employee contributes to the plan. When the worker
retires, the amount of retirement benefits that he or she receives will depend on the
balance in the account, which is the sum of all the contributions that have been made
plus interest, dividends, and capital gains (or losses). The worker usually has the
choice of receiving these funds in the form of a life-long annuity,9 as a series of fixed
payments over a period of years, or as a lump sum.
In recent years, many employers have converted their traditional pensions to
hybrid plans that have characteristics of both DB and DC plans. The most popular
of these hybrids has been the cash balance plan. A cash balance plan looks like a DC
plan in that the accrued benefit is defined in terms of an account balance. The
employer makes contributions to the plan and pays interest on the accumulated
balance. However, in a cash balance plan, the account balances are merely
bookkeeping devices. They are not individual accounts that are owned by the
participants. Legally, therefore, a cash balance plan is a defined benefit plan.
8Defined benefit pensions are taxed when the employee receives benefits during retirement.
9Retirees can also choose a joint and survivor annuity in which a surviving spouse continues
to receive an annuity after the retired worker’s death.

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CRS-4
The Locus of Risk in DB and DC Plans. In a defined benefit plan, it is the
employer who bears the financial risk of the plan, while in a defined contribution plan
it is the employee who bears the financial risk. In a defined benefit plan, the employer
promises to provide retirement benefits equal to a certain dollar amount or a specific
percentage of the employee’s pay. The employer contributes money to a pension trust
that is invested in stocks, bonds, real estate, or other assets. Retirement benefits are
paid from this trust fund. The employer is at risk for the amount of retirement
benefits that have been promised to employees and their survivors. If there are
insufficient funds in the pension trust to pay the accrued benefits, the firm that
sponsors the pension plan is legally obligated to make up the difference by paying
more money into the pension fund.
In a defined contribution plan, the employer bears no risk beyond its obligation
to make contributions to each employee’s retirement account from the firm’s current
revenue. In these plans, it is the employee who bears the risk that his or her
retirement account will increase in value by an amount sufficient to provide adequate
income during retirement. If the contributions made to the account by the employer
and the employee are insufficient, or if the securities in which the account is invested
lose value or increase in value too slowly, the employee risks having an income in
retirement that is not sufficient to maintain his or her desired standard of living. If this
situation occurs, the worker might choose to delay retirement.
Pension coverage is high in medium and large firms ... According
to the Bureau of Labor Statistics (BLS), 79% of full-time employees in medium and
large private establishments participated in an employer-sponsored retirement plan in
1997.10 Data collected by the Bureau of the Census indicate slightly lower rates of
pension coverage. In the Census Bureau’s Current Population Survey (CPS), 70%
of employees aged 25 to 64 who worked year-round, full-time at private-sector firms
with 100 or more employees reported that they participated in an employer-sponsored
pension or retirement savings plan in 2000.11
... but remains low in small firms. Among small employers, both employer
sponsorship and employee participation in retirement plans have lagged behind the
rates achieved among medium and large firms. In the 1990s, pension participation in
small firms rose, but it is still only about half the rate of participation among workers
in larger firms. The BLS’ biennial survey of small employers showed that 35% of full-
10For purposes of its surveys of employee benefits, BLS defines medium and large private
establishments as those with 100 or more employees.
11The difference in pension participation rates in the BLS and CPS data results in part from
differences in the sampling procedures and survey methods. The BLS conducts its survey
among business establishments, while the CPS is conducted among a sample of households.
The BLS survey consists of a lengthy set of questions focused on employee benefits that are
asked of human resources professionals or other managers. On the other hand, only a small
portion of the March demographic supplement to the CPS is devoted to benefits provided at
work. The questions are asked of a single respondent in the household, who may or may not
have full knowledge of his or her own pension benefits, much less those of other adults in the
household. Consequently, it should not be surprising that pension coverage is less widely
reported on the CPS than on the BLS survey of employers.

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CRS-5
time workers in independently-owned firms with fewer than 100 employees
participated in a pension or retirement savings plan in 1990. The participation rate
remained steady at 34% to 35% from 1990 through 1994. In the 1996 BLS survey,
42% of full-time employees in small, independently-owned businesses were
participants in employer-sponsored retirement plans. Although this rate of
participation is low relative to that of large businesses, it represents an increase of
nearly 2 million in the number of workers in small firms who were participants in a
pension or retirement savings plan in 1996 compared to 1994.
Many factors affect a firm’s decision to sponsor a retirement plan and a worker’s
decision to participate in the plan. In any given year, changes in the business climate
— inflation, interest rates, wage increases, the cost of other benefits (such as health
insurance), trends in business revenues and profits — could weigh more heavily in a
firm’s decision to sponsor an employee retirement plan than the potential tax
advantages it could gain by establishing a plan. Likewise, an employee’s decisions to
participate or not to participate in a retirement plan may be affected by such variables
as the rate of growth of wages, the rising cost of employee health insurance
premiums, his or her confidence in the financial status of Social Security, and whether
another family member already has pension coverage.
In a recent survey, small employers most frequently cited uncertainty about
future revenues and the expense of employer contributions as the reasons that they did
not offer either a traditional pension or other employer-sponsored retirement plan.
Small employers also cited a preference among employees for higher wages and large
numbers of part-time or temporary workers as reasons that they chose not to sponsor
a retirement plan.12 In the 2001 Small Employer Retirement Survey, jointly
sponsored by the Employee Benefit Research Institute and the American Savings
Education Council, 48% of small employers that did not offer a pension plan said that
uncertainty of revenue was a major reason, and 46% cited the cost of employer
contributions. Forty-three percent of small employers cited their employees’
preference for higher wages or other benefits, while 32% said that high employee
turnover was a major reason for having no retirement plan. In contrast, 34% cited the
administrative burden of providing a pension as a major reason for not offering a
retirement plan, and only 22% said that government regulations were a significant
reason that they did not offer a retirement plan.
Pension coverage in small firms is an important issue to the Congress in part
because of the large number of people employed by small businesses. In 2000, for
example, more than 31 million people worked for firms with fewer than 25
employees.13 The relatively low rates of employer sponsorship and employee
participation in retirement plans at small businesses have prompted Congress to look
for ways to make it easier for small employers to establish and maintain retirement
plans for their employees. Because small employers may be reluctant to take on the
financial risk and administrative burden of establishing a defined-benefit pension plan,
Congress has sought to encourage greater pension coverage among small businesses
12 Dallas Salisbury, Teresa Turyn, and Ruth Helman, EBRI 2001 Retirement Surveys,
Employee Benefit Research Institute Issue Brief 234, Washington, DC, June 2001.
13 Full-time and part-time wage and salary workers. (Source: Current Population Survey.)

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CRS-6
mainly by easing the financial and reporting requirements associated with certain types
of defined contribution pension plans. The Revenue Act of 1978 (P.L. 95-600)
authorized a defined contribution plan called the Simplified Employee Pension
(SEP).14 More recently, the Small Business Job Protection Act of 1996 (P.L. 104-
188) authorized another type of defined contribution plan called the Savings Incentive
Match Plan for Employees (SIMPLE).15 The data collected by BLS and the Bureau
of the Census over the next few years should help to reveal the degree to which recent
policy changes such as SIMPLE have met the needs of small employers for
establishing employee retirement plans and the extent to which further efforts —
whether in the form of technical assistance to employers, employee education, or
further financial inducements to both — may be needed to promote pension coverage
among workers in small businesses.
The number of defined benefit plans is declining. According to the
Pension and Welfare Benefits Administration (PWBA) of the U.S. Department of
Labor, the number of defined benefit plans declined from 175,000 to 59,500 between
1983 and 1997.16 The decline in the number of DB plans resulted mainly from the
termination of a large number of small plans. Between 1983 and 1997, the number
of defined benefit pension plans with fewer than 100 participants fell from 149,164
to 43,647, a decline of 70.7%. The number of large DB plans fell, too, declining form
25,979 in 1983 to 15,852, or 39.0%. However, while the decline in the number of
plans was larger among small plans, the decline in the number of participants was
greater among large plans. The number of active participants in small DB plans fell
from 1,861,000 in 1983 to 660,000 in 1997.17 At the same time, the number of active
participants in large DB plans fell from 28,104,000 to 22,085,000.
14P.L. 95-600 authorized tax exemption only for employer contributions to a SEP. The Tax
Reform Act of 1986 (P.L. 99-514) allowed workers in firms with fewer than 25 employees to
contribute to a SEP on a tax-deferred basis through salary reduction (SARSEP). P.L. 104-
188 authorized SIMPLE plans to replace SARSEPs. Firms may continue to establish SEPs
funded exclusively by employer contributions, but new SARSEPs were prohibited after
December 31, 1996. Previously existing SARSEPs may continue as before.
15For more information about SEP and SIMPLE, see CRS Report 96-243, Simplified
Employee Pensions: A Fact Sheet and CRS Report 96-758, Pension Reform: SIMPLE Plans
for Small Employers, both by James R. Storey.
16Private Pension Plan Bulletin, U.S. Department of Labor, Pension and Welfare Benefits
Administration, (Number 10, Winter 2001).
17BLS, Private Pension Plan Bulletin, (Number 10, Winter 2001). The number of active
participants is the total number of participants minus those who have retired or who have
separated from the employer with a vested benefit but are not retired.

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CRS-7
Sources of Data on Pension Coverage
The main sources of data on which this report is based are the Employee Benefits
Survey (EBS), conducted by the U.S. Bureau of Labor Statistics and the Current
Population Survey (CPS), which is administered by the Bureau of the Census. The
EBS is a survey of business establishments. It is an element of the National
Compensation Survey, which also produces the Employment Cost Index (ECI). The
ECI is a measure of the cost of employee compensation across industries that includes
both cash and in-kind compensation. Data from the ECI are widely used among
financial analysts and economists in both government and the private sector, and it has
been designated in federal statute as the basis for computing annual wage adjustments
for civilian federal employees and military personnel.
The CPS is conducted each month by the Bureau of the Census among a random
sample of approximately 50,000 households, mainly to collect information about labor
force participation needed to estimate the national unemployment rate. Each March,
supplemental questions are asked about household economic and demographic
characteristics and about income and employment during the previous year. The
questions about employment include two questions about pension coverage and
participation during the previous year. Respondents are asked whether any employer
for whom they worked had a pension or other type of retirement plan for any of its
employees. Respondents who answer “yes” to this question are asked whether they
were included in the plan. The data collected in the annual March supplement to the
CPS are especially useful for policy analysis because of the large sample size, the
breadth of topics covered, and the timeliness of the data.
Simplified Defined Benefit Plans for Small Employers:
The “SAFE” and “SMART” Proposals
A report issued by the PWBA in 1997 identified several reasons for the decline
of DB plans among small employers, including aspects of tax treatment, funding
requirements, and reporting procedures, some of which can be modified only through
congressional action. The working group organized by the PWBA recommended that
“the Secretary of Labor support legislative and regulatory changes that will restore
the viability of defined benefit plans.” In the 106th Congress, two simplified defined
benefit plans were proposed. They were the Secure Assets For Employees (SAFE)
plan, introduced as H.R. 2190 (Nancy Johnson), and the Secure Money Annuity or
Retirement Trust (SMART), which was introduced as H.R. 1213 (Neal).
As proposed in H.R. 2190, SAFE plans could be established by any employer
with fewer than 100 employees that does not already have a qualified retirement plan.
SAFE plans would be required to be fully funded at all times, but they would be
exempted from paying premiums to the PBGC and would be subject to minimal
reporting requirements and simplified actuarial valuation. SAFE plans would
guarantee a minimum benefit equal to 1%, 2%, or 3% of pay for each year of service,
and would pay higher benefits if the plan’s assets grow to exceed the amount needed
to pay the minimum benefit. Employees would be fully vested immediately in their
retirement benefit, which would be funded either through an individual annuity or a
trust. Separating employees could transfer benefit credits to another employer’s

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CRS-8
SAFE plan or to an individual retirement account (IRA). A 20% excise tax would be
levied on early withdrawals. A maximum of $160,000 in annual compensation
(indexed to inflation) could be used to determine plan contributions and benefits, but
SAFE plans would not be subject either to the “non-discrimination tests” or the “top-
heavy” rules that apply to other defined benefit pension plans.18 Initially, employers
could make retroactive contributions that would be based on a “look-back” period of
10 years.
SMART plans, too, would allow employer contributions ranging from 1% to 3%
of salary and require full and immediate employee vesting. SMART plans also could
pay benefits in excess of the minimum guaranteed level if investment returns exceeded
the gains necessary to fund the guaranteed benefit. SMART plans would allow
employees who leave their employer to purchase an annuity or to roll over the
accumulated value of their benefits into an IRA or another employer-sponsored plan.
The maximum annual compensation that could be taken into account for determining
contributions or benefits would be $100,000, indexed to inflation. Benefits from a
SMART plan would be paid monthly as a life annuity to the employee or in an
actuarially equivalent form (such as a joint and survivor annuity for the employee and
his or her spouse). Unlike SAFE, SMART plans would be required to pay insurance
premiums to the PBGC, but at lower rates than other defined benefit pension plans.
Retroactive contributions to SMART plans would not be allowed.
Recent Trends in Coverage by Employer-Sponsored
Pension Plans
Surveys of both households and business establishments indicate that retirement
plan coverage among employees of small firms rose during the 1990s. Pension
coverage in medium and large firms has remained steady, but it began the decade at
a much higher level than in small firms. According to the Bureau of Labor Statistics,
the proportion of full-time employees in independently-owned businesses with fewer
than 100 workers who were participating in an employer-sponsored retirement plan
rose from 35% in 1990 to 42% in 1996. Among businesses with 100 or more
employees, the proportion of workers participating in employer-sponsored retirement
plans was 78% in 1991 and 79% in 1997. The Census Bureau’s Current Population
Survey (CPS) shows a similar trend. The CPS data indicate that in firms with fewer
than 100 employees, the proportion of year-round, full-time workers between the ages
of 25 and 64 who participated in an employer-sponsored retirement plan rose from
31% in 1991 to 37% in 2000. CPS data indicate that among workers employed at
firms with 100 or more employees, 70% participated in a retirement plan in 2000,
which was unchanged from the participation rate in 1991.
Data Collected from Employers
Medium and Large Firms. The Bureau of Labor Statistics conducts annual
surveys of employers to gather information about paid leave, health insurance, pension
coverage, flexible spending accounts, and other employee benefits. In even-numbered
18These rules are intended to prevent pension plans from providing disproportionately large
benefits to highly compensated employees or members of the firm’s management.

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CRS-9
years, the BLS surveys establishments with fewer than 100 employees, and in odd-
numbered years the agency surveys medium and large employers, defined as those
with 100 or more employees. Table 1 presents results from the survey of medium
and large establishments. In each year of the survey, four out of five full-time
workers in medium and large firms participated in an employer-sponsored pension or
retirement savings plan. Although the rate of participation has changed very little
during the 1990s, there has been a notable shift in participation away from defined
benefit plans toward defined contribution plans. In 1997, 50% of employees in
medium and large firms were covered by a DB plan, down from 59% in 1991. At the
same time, the proportion of full-time workers in these firms who participated in a DC
plan rose from 48% to 57%.
Table 1. Participation in Employer-Sponsored Pension or
Retirement Savings Plans in Medium and Large
Private Establishments
(Full-time employees in establishments with 100 or more workers)
All retirement
Defined benefit
Defined contribution
Year
plans*
plans
plans
1991
78%
59%
48%
1993
78%
56%
49%
1995
80%
52%
55%
1997
79%
50%
57%
Source: U.S. Department of Labor. Employee Benefits in Medium and Large Private
Establishments, Washington DC, various years.
* Includes defined benefit and defined contribution plans. Some employees participate in both types
but are counted only once in “all retirement plans.”
Small Firms. Results of the BLS survey of independent business
establishments with fewer than 100 employees are displayed in Table 2. The data
show an increase in coverage by employer-sponsored retirement plans from 35% in
1990 to 42% in 1996. The data also show a trend toward defined contribution plans
similar to that observed among medium and large businesses. The proportion of full-
time workers in small establishments who participated in a DB plan fell from 12% to
10% during this period, while participation in DC plans rose from 28% to 35%.
Some employees are covered by both a defined benefit plan and a defined contribution
plan through the same employer. With only 10% of employees participating in a DB
plan, however, most workers in small businesses who participate in a retirement plan
are covered only by a DC plan.
The data collected by BLS indicate that the rising rate of retirement plan
coverage among employees of small businesses coincided with the growth of defined
contribution plans (of which SEP and SIMPLE are two examples) and the relative
decline in defined benefit plans. The data also indicate, however, that little of the
increase in retirement plan coverage has been a result of employers who otherwise
would not have sponsored a retirement plan adopting a SEP. In both 1990 and 1996,
only about 1% of full-time employees in small private establishments participated in

---

CRS-10
a SEP. Results of another recent survey of small employers shed some light on why
SEP and SIMPLE have not yet had much impact on the extent of retirement plan
coverage in small firms. According to the 2001 Small Employer Retirement Survey,
sponsored by the Employee Benefit Research Institute and the American Savings
Education Council, 34% of small employers had never heard of SIMPLE plans and
another 13% said that they were “not too familiar” with these plans. Fifty-two
percent were unaware of the availability of SEPs, while another 16% said that they
had heard of SEPs but knew little about them. The low level of awareness about
SIMPLE and SEP plans among small employers points to the possibility that outreach
and education efforts by government agencies and private financial institutions could
lead to higher rates of pension coverage in small firms.
Table 2. Participation in Employer-Sponsored Pension or
Retirement Savings Plans in Small, Independently Owned
Businesses
(Full-time employees in independent establishments with under 100 workers)
All retirement
Defined benefit
Defined contribution
Year
plans*
plans
plans
1990
35%
12%
28%
1992
34%
12%
27%
1994
35%
9%
29%
1996
42%
10%
35%
Source: U.S. Department of Labor. Bureau of Labor Statistics. Employee Benefits in Small Private
Establishments, Washington DC, various years.
* Includes defined benefit and defined contribution plans. Some employees participate in both types
but are counted only once in “all retirement plans.”

---

CRS-11
Distinguishing Between “Establishments” and “Firms”
The term establishment usually refers to a single place of business at a particular
location or all branches of a business in a particular metropolitan area or county. A
firm comprises all of the establishments that together form a corporation, partnership,
or other business entity.
The Employee Benefits Survey is conducted among a nationally representative
sample of business establishments. As defined by the BLS, an establishment might
be a branch or small operating unit of a larger firm. BLS also publishes data that
pertain exclusively to small independent businesses, which include only
independently-owned small private establishments. Small independent businesses
account for about three-fourths of the employees covered by the BLS survey of small
establishments. The BLS data presented in this CRS Report reflect pension coverage
in small independently-owned businesses.
In the Current Population Survey, employer characteristics are reported at the
level of the firm, which may include more than one establishment.
Pension Plan Financial Trends. Financial information reported by
employers to the U.S. Department of Labor also shows the extent to which pension
coverage has shifted from DB plans to DC plans. In 1975, pension plans held total
assets of $260 billion, of which 72% ($186 billion) was held by defined benefit plans.
By 1997, pension plans held total assets of $3.5 trillion, but the share held by DB
plans had fallen to 49% ($1.7 trillion). Contributions to pension plans shifted even
more dramatically during this period. In 1975, employer and employee contributions
to pension plans totaled $37 billion. Of this amount, 65% ($24 billion) was
contributed to DB plans. In 1997, employers and employees contributed $178 billion
to pension plans, but 83% of the total ($148 billion) was contributed to defined
contribution plans. Benefit payments, too, reflected the impact of the increasing
popularity of DC plans. In 1975, 68% of all benefits paid by private-sector pension
plans ($13 billion out of $19 billion) were paid by defined benefit pensions. In 1997,
58% of the $232 billion in benefit payments were disbursed from DC plans. In that
year, DC plans paid $135 billion in benefits, while DB plans paid out $97 billion in
benefits.
Data Collected from Households
The Current Population Survey is conducted each month by the Bureau of the
Census among a nationally representative sample of approximately 50,000
households, primarily for the purpose of estimating the rates of employment and
unemployment. Each March, supplemental questions are asked about employment,
income, health insurance, pension coverage, and receipt of government benefits during
the previous calendar year. The responses to the CPS confirm that pension
participation in small firms rose steadily throughout the 1990s, as was indicated by the
BLS surveys of employers. The CPS data also confirm that pension coverage
remains lower in small firms than in firms with 100 or more employees.

---

CRS-12
Pension Participation by Size of Employer. The data displayed in Table
3 show that from 1991 to 2000, the number of workers between the ages of 25 and
64 who were employed year-round, full-time increased from 53 million to 69 million.
At the same time, the number of such workers whose employer offered a pension or
retirement savings plan increased from 33.5 million to 45.8 million. Thus, the
proportion of year-round, full-time workers in this age group who were employed at
a firm offering a retirement plan rose from 63.3% to 66.5%. Most of the increase in
pension sponsorship during this period occurred among firms with fewer than 100
employees. In 2000, 34.4% of full-time workers in businesses with fewer than 25
employees were employed at firms with pensions or retirement savings plans,
compared to 27% in 1991. Among workers in firms with 25 to 99 employees, 58.8%
were employed at firms that sponsored retirement plans in 2000, compared to 49.6%
in 1991. Nevertheless, in 2000 workers in small businesses still were much less likely
than employees of large firms to work for an employer that sponsored a pension or
retirement savings plan. Among employees at businesses with 100 or more workers,
79.5% worked for a firm that sponsored a pension or retirement savings plan in 1991
and 80.6% worked at such firms in 2000.
Table 3 also shows the percentage of year-round, full-time employees who
participated in an employer-sponsored pension or retirement savings plan.19 This
statistic takes into account the impact of employers that do not sponsor a plan on
overall pension participation rates. Among firms of all sizes, the proportion of year-
round, full-time employees between the ages of 25 and 64 who participated in a
pension or retirement savings plan increased from 55.3% in 1991 to 57.7% in 2000.
Participation among workers in firms with 100 or more employees rose by less than
one percentage point from 69.7% to 70.4%. Pension participation rose more
substantially among those who worked in small firms. In firms with 25 to 99
employees, participation in pensions and retirement savings plans rose from 42.2% to
49.7%, while in firms with fewer than 25 workers, participation rose from 23.4% to
29.5%.
19 Not all employees whose employer sponsors a retirement plan are eligible to participate.
For example, workers who have been employed for less than one year can be excluded.

---

CRS-13
Table 3. Participation in Retirement Plans by Size of Firm
(Private-sector non-agricultural workers, ages 25 to 64, employed year-round, full-time)
Size of firm
Workers
Employer sponsors plan
Employees participating
(Employees)
(thousands)
Workers
Percent
Participants
Percent
All firms
1991
52,954
33,541
63.3%
29,294
55.3%
1992
53,768
34,209
63.6%
29,676
55.2%
1993
54,954
34,092
62.0%
29,636
53.9%
1994
57,156
37,080
64.9%
32,043
56.1%
1995
60,687
38,348
63.2%
33,298
54.9%
1996
63,145
41,149
65.2%
35,535
56.3%
1997
64,001
41,855
65.4%
36,184
56.5%
1998
65,931
44,095
66.9%
38,092
57.8%
1999
67,065
44,794
66.8%
38,901
58.0%
2000
68,910
45,813
66.5%
39,728
57.7%
Under 25
1991
11,705
3,160
27.0%
2,740
23.4%
1992
11,942
3,181
26.6%
2,696
22.6%
1993
12,555
3,134
25.0%
2,688
21.4%
1994
13,120
3,479
26.5%
2,996
22.8%
1995
14,627
3,715
25.4%
3,109
21.3%
1996
15,343
4,365
28.5%
3,713
24.2%
1997
14,732
4,356
29.6%
3,722
25.3%
1998
15,101
4,789
31.7%
4,072
27.0%
1999
15,582
5,259
33.4%
4,522
29.0%
2000
16,213
5,575
34.4%
4,776
29.5%
25 to 99
1991
8,010
3,972
49.6%
3,383
42.2%
1992
8,416
4,146
49.3%
3,556
42.3%
1993
8,217
3,967
48.3%
3,374
41.1%
1994
8,476
4,526
53.4%
3,805
44.9%
1995
9,108
4,923
54.1%
4,188
46.0%
1996
9,421
5,378
57.1%
4,531
48.1%
1997
9,691
5,416
55.9%
4,602
47.5%
1998
9,940
5,794
58.3%
4,838
48.7%
1999
9,974
5,881
59.0%
4,933
49.5%
2000
10,289
6,053
58.8%
5,113
49.7%
100 or more
1991
33,239
26,409
79.5%
23,171
69.7%
1992
33,411
26,882
80.5%
23,424
70.1%
1993
34,182
26,990
79.0%
23,574
69.0%
1994
35,560
29,075
81.8%
25,242
71.0%
1995
36,951
29,706
80.4%
26,000
70.4%
1996
38,381
31,407
81.8%
27,291
71.1%
1997
39,578
32,083
81.1%
27,860
70.4%
1998
40,890
33,513
82.0%
29,182
71.4%
1999
41,509
33,654
81.1%
29,447
70.9%
2000
42,409
34,185
80.6%
29,839
70.4%
Source: CRS analysis of the Current Population Survey, various years.

---

CRS-14
Pension Participation by Employee Gender. Table 4 shows the rates
of participation in pension and retirement savings plans by men and women ages 25
to 64 who were employed year-round, full-time. Between 1991 and 2000, the
proportion of men whose employer sponsored a pension or retirement savings plan
rose by two percentage points from 64.3% to 66.5%. At the same time, the
proportion of women who worked at firms that sponsored pensions or retirement
savings plans increased by more than four percentage points from 61.9% to 66.5%.
Thus by 2000, women who were employed year-round, full-time were just as likely
their male counterparts to work for an employer that sponsored a retirement plan of
some kind. Women, however, were less slightly likely than men to participate in
these plans. In 2000, 59% of men who were employed year-round, full-time
participated in a pension or retirement savings plan, compared to 56% of women who
worked year-round, full-time.
Table 4. Participation in Retirement Plans by Employee Gender
(Private-sector non-agricultural workers, ages 25 to 64, employed year-round, full-time)
Workers
Employer sponsors plan
Employees participating
(thousands)
Workers
Percent
Participants
Percent
Men
1991
31,556
20,296
64.3%
18,183
57.6%
1992
32,001
20,535
64.2%
18,152
56.7%
1993
32,867
20,360
62.0%
18,055
54.9%
1994
34,329
22,265
64.9%
19,617
57.1%
1995
36,504
23,008
63.0%
20,359
55.8%
1996
37,912
24,541
64.7%
21,577
56.9%
1997
38,207
24,796
64.9%
21,887
57.3%
1998
39,399
26,270
66.7%
23,160
58.8%
1999
39,757
26,596
66.9%
23,553
59.2%
2000
40,704
27,048
66.5%
23,880
58.7%
Women
1991
21,398
13,245
61.9%
11,111
51.9%
1992
21,767
13,675
62.8%
11,524
52.9%
1993
22,087
13,732
62.2%
11,581
52.4%
1994
22,827
14,815
64.9%
12,426
54.4%
1995
24,182
15,336
63.4%
12,939
53.5%
1996
25,232
16,609
65.8%
13,958
55.3%
1997
25,795
17,060
66.1%
14,297
55.4%
1998
26,532
17,825
67.2%
14,932
56.3%
1999
27,308
18,198
66.6%
15,349
56.2%
2000
28,207
18,765
66.5%
15,847
56.2%
Source: CRS analysis of the Current Population Survey, various years.

---

CRS-15
Pension Participation by Employee Age. Table 5 displays rates of
participation in pension and retirement savings plans among year-round, full-time
workers in four age categories. In 1991, young workers — ages 25 to 34 — were
less likely than middle-aged and older workers to be employed at a firm that
sponsored a pension or retirement savings plan. However, between 1991 and 2000
the proportion of young workers who were employed at firms that sponsored a
pension or retirement savings plan increased from 59.6% to 63.4%. By 2000, the
percentage of year-round, full-time workers whose employer sponsored a pension or
retirement savings plan differed relatively little among employees of various ages,
ranging from 63.4% among those 25 to 34 years old to 70.2% among those 45 to 54
years old.
Pension participation varies more by age than does the likelihood of working for
an employer that sponsors a pension or retirement savings plan. Pension participation
generally rises with employee age, although it is lower for workers 55 or older than
among those 45 to 54 years old. In 2000, 50.4% of workers 25 to 34 years old
participated in a retirement plan, compared with 58.1% of those who were 35 to 44
years old and 63.9% of those who were 45 to 54 years old. Among year-round, full-
time workers between the ages of 55 and 64, 60.2% participated in a pension or
retirement savings plan in 2000.

---

CRS-16
Table 5. Participation in Retirement Plans by Employee Age
(Private-sector non-agricultural workers, ages 25 to 64, employed year-round, full-time)
Employee
Workers
Employer sponsors plan
Employees participating
age
(thousands)
Workers
Percent
Participants
Percent
25 to 34
1991
18,865
11,238
59.6%
9,095
48.2%
1992
18,559
11,127
60.0%
8,848
47.7%
1993
18,748
10,862
57.9%
8,746
46.7%
1994
19,488
12,038
61.8%
9,460
48.5%
1995
19,759
11,673
59.1%
9,337
47.3%
1996
19,744
12,389
62.8%
9,865
50.0%
1997
19,829
12,508
63.1%
9,832
49.6%
1998
19,737
12,455
63.1%
9,896
50.1%
1999
19,535
12,513
64.1%
9,903
50.7%
2000
19,665
12,457
63.4%
9,906
50.4%
35 to 44
1991
17,261
11,109
64.4%
9,823
56.9%
1992
17,565
11,584
66.0%
10,234
58.3%
1993
18,203
11,614
63.8%
10,265
56.4%
1994
18,924
12,492
66.0%
11,082
58.6%
1995
20,439
13,235
64.8%
11,742
57.5%
1996
21,360
14,161
66.3%
12,337
57.8%
1997
21,528
14,120
65.6%
12,377
57.5%
1998
22,287
15,125
67.9%
13,211
59.3%
1999
22,812
15,387
67.5%
13,440
58.9%
2000
23,371
15,499
66.3%
13,575
58.1%
45 to 54
1991
11,226
7,571
67.4%
7,019
62.5%
1992
11,765
7,782
66.2%
7,175
61.0%
1993
12,497
8,146
65.2%
7,441
59.6%
1994
12,973
8,839
68.1%
8,117
62.6%
1995
14,042
9,240
65.8%
8,381
59.7%
1996
15,278
10,259
67.2%
9,290
60.8%
1997
15,576
10,638
68.3%
9,760
62.7%
1998
16,547
11,615
70.2%
10,519
63.6%
1999
17,238
12,053
69.9%
11,089
64.3%
2000
18,162
12,746
70.2%
11,606
63.9%
55 to 64
1991
5,602
3,623
64.7%
3,358
59.9%
1992
5,879
3,717
63.2%
3,419
58.2%
1993
5,506
3,470
63.0%
3,183
57.8%
1994
5,771
3,711
64.3%
3,384
58.7%
1995
6,446
4,196
65.1%
3,838
59.5%
1996
6,763
4,340
64.2%
4,043
59.8%
1997
7,069
4,588
64.9%
4,215
59.6%
1998
7,359
4,900
66.6%
4,466
60.7%
1999
7,479
4,841
64.7%
4,470
59.8%
2000
7,713
5,111
66.3%
4,640
60.2%
Source: CRS analysis of the Current Population Survey, various years.

---

CRS-17
Employee Pension Participation by Race. Race is classified on the CPS
as white, black, American Indian/Eskimo, or Asia/Pacific Islander. Ethnic origin
(Hispanic, for example), is identified separately from race. Between 1991 and 2000,
the likelihood of being employed at a firm that sponsored a retirement plan remained
basically unchanged for black workers, while it increased for white workers and those
of other races. (See Table 6). Moreover, the proportion of black workers who
participated in a retirement plan fell from 51.4% to 49.7%. Among white workers,
the proportion who participated in a retirement plan increased from 56.2% to 59.2%,
while among workers whose race was classified as “other,” mainly (Native American
or Asian), participation increased from 43.8% to 50.8%.
Table 6. Participation in Retirement Plans by Employee Race
(Civilian non-agricultural workers, ages 25 to 64, employed year-round, full-time)
Employee
Workers
Employer sponsors plan
Employees participating
Race
(thousands)
Workers
Percent
Participants
Percent
White
1991
45,910
29,354
63.9%
25,816
56.2%
1992
46,582
29,815
64.0%
26,111
56.1%
1993
47,125
29,805
63.3%
26,073
55.3%
1994
48,748
31,976
65.6%
27,864
57.2%
1995
51,745
32,953
63.7%
28,778
55.6%
1996
53,619
35,340
65.9%
30,738
57.3%
1997
53,941
35,714
66.2%
31,085
57.6%
1998
55,495
37,565
67.7%
32,720
59.0%
1999
56,082
37,954
67.7%
33,246
59.3%
2000
57,117
38,655
67.7%
33,828
59.2%
Black
1991
5,099
3,128
61.3%
2,623
51.4%
1992
5,146
3,210
62.4%
2,566
49.9%
1993
5,435
3,045
56.0%
2,478
45.6%
1994
5,890
3,699
62.8%
3,003
51.0%
1995
6,305
3,950
62.7%
3,314
52.6%
1996
6,602
4,105
62.2%
3,324
50.4%
1997
6,954
4,315
62.1%
3,535
50.8%
1998
7,258
4,565
62.9%
3,689
50.8%
1999
7,613
4,820
63.3%
3,928
51.6%
2000
8,165
4,988
61.1%
4,058
49.7%
Other
1991
1,945
1,060
54.5%
852
43.8%
1992
2,041
1,184
58.0%
1,000
49.0%
1993
2,394
1,242
51.9%
1,084
45.3%
1994
2,518
1,405
55.8%
1,176
46.7%
1995
2,637
1,441
54.6%
1,205
45.7%
1996
2,923
1,704
58.3%
1,473
50.4%
1997
3,107
1,827
58.8%
1,564
50.3%
1998
3,177
1,965
61.9%
1,684
53.0%
1999
3,370
2,020
59.9%
1,727
51.3%
2000
3,629
2,170
59.8%
1,843
50.8%
Source: CRS analysis of the Current Population Survey, various years.

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CRS-18
Pension Participation by Employee Earnings. Table 7 shows the
relationship between earnings and participation in employer-sponsored pension and
retirement savings plans. All earnings in Table 7 have been indexed to 2000 dollars
based on the annual percentage changes in the wage and salary component of the
Employment Cost Index. Between 1991 and 2000, wages and salaries rose at an
average annual rate of 3.4%.
In 1991, only 35.0% of year-round, full-time workers with annual earnings of
less than $20,000 were employed by a firm that sponsored a retirement plan. By 2000,
the percentage of low-wage workers who were employed at a firm that sponsored a
retirement plan had risen to 41.5%. The percentage of workers who earned between
$20,000 and $40,000 who were employed at firms that sponsored retirement plans
also rose during this time, rising from 61.7% in 1991 to 64.9% in 2000. Workers
earning more than $40,000 per year were more likely than those earning less than
$40,000 to be employed by firms that sponsored retirement plans, although the
percentage increase in sponsorship between 1991 and 2000 was smaller than among
workers earning less than $40,000. In 2000, 78% of workers with annual earnings
between $40,000 and $60,000 were employed at firms that sponsored pensions or
retirement savings plans, as were 80% of employees whose annual earnings exceeded
$60,000.
Across all firms (including those that did not sponsor any kind of retirement
plan), only 28.3% of full-time workers who earned less than $20,000 participated in
an employer-sponsored retirement plan in 2000. Although participation was
significantly higher among full-time workers who earned between $20,000 and
$40,000 (54.6%) than among those earning less than $20,000, it still lagged behind
the participation rates of higher-paid employees. Among those who earned between
$40,000 and 60,000, 72% participated in an employer-sponsored retirement plan in
2000, as did 75% of those who earned more than $60,000.
Some, but not all, of the lower participation rate among low-wage workers can
be explained by the lower rate of pension sponsorship among the firms at which they
are employed. For example, in 2000 78% percent of workers with annual earnings
of $40,000 to $60,000 were employed at firms that sponsored a pension or retirement
savings plan and 72% of employees with earnings in this range participated in such
plans. Thus, among employees whose employer sponsored a plan, the participation
rate was 92%. (.72/.78 = .923). Likewise, among employees whose earnings in
2000 exceeded $60,000, 80% worked for an employer that sponsored a retirement
plan and 75% participated in a retirement plan. Therefore, the participation rate
among employees who earned $60,000 or more and whose employer sponsored a
retirement plan was 94% (.75/.80 = .9375).
Participation rates were significantly lower among low-wage workers. Among
workers whose 2000 earnings were less than $20,000, only 41.5% worked for an
employer that sponsored a retirement plan and just 28.3% participated in a retirement
plan. Thus the participation rate among low-wage employees whose employer
sponsored a retirement plan was 68% (.283/.415 = .682). Among those who earned
$20,000 to $40,000, 65% worked for an employer that sponsored a retirement plan
and 55% participated in such a plan, yielding a participation rate of 85% among those
whose employer sponsored a retirement plan (.55/.65 = .846).

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CRS-19
Table 7. Participation in Retirement Plans by Annual Earnings
(Private-sector non-agricultural workers, ages 25 to 64, employed year-round, full-time)
Employee Annual
Number of
Employer sponsors plan
Employees participating
Earnings
workers
Workers
Percent
Participants
Percent
Under $20,000
1991
9,320
3,265
35.0%
2,277
24.4%
1992
10,148
3,761
37.1%
2,558
25.2%
1993
10,657
3,772
35.4%
2,567
24.1%
1994
11,539
4,814
41.7%
3,176
27.5%
1995
12,002
4,666
38.9%
3,232
26.9%
1996
12,336
5,058
41.0%
3,461
28.1%
1997
11,552
4,659
40.3%
3,124
27.1%
1998
12,641
5,418
42.9%
3,644
28.8%
1999
12,990
5,489
42.3%
3,708
28.5%
2000
12,213
5,065
41.5%
3,450
28.3%
$20,000-$39,999
1991
21,543
13,292
61.7%
11,235
52.2%
1992
22,298
13,908
62.4%
11,721
52.6%
1993
22,527
13,836
61.4%
11,798
52.4%
1994
23,039
14,780
64.2%
12,533
54.4%
1995
24,758
15,568
62.9%
13,146
53.1%
1996
25,407
16,353
64.4%
13.625
53.6%
1997
27,378
17,670
64.5%
14,917
54.5%
1998
27,535
18,490
67.2%
15,606
56.7%
1999
27,319
18,186
66.6%
15,421
56.5%
2000
28,298
18,354
64.9%
15,442
54.6%
$40,000-$59,999
1991
12,719
9,653
75.9%
8,851
69.6%
1992
11,923
9,184
77.0%
8,445
70.8%
1993
12,069
9,058
75.1%
8,283
68.6%
1994
11,921
9,146
76.7%
8,412
70.6%
1995
12,434
9,246
74.4%
8,507
68.4%
1996
14,250
10,869
76.3%
10,073
70.7%
1997
13,486
10,347
76.7%
9,465
70.2%
1998
13,887
10,727
77.2%
9,910
71.4%
1999
13,888
10,808
77.8%
9,972
71.8%
2000
14,420
11,253
78.0%
10,354
71.8%
$60,000 or more
1991
9,370
7,329
78.2%
6,929
74.0%
1992
9,400
7,357
78.3%
6,952
74.0%
1993
9,701
7,426
76.6%
6,988
72.0%
1994
10,656
8,340
78.3%
7,922
74.3%
1995
11,493
8,864
77.1%
8,413
73.2%
1996
11,151
8,869
79.5%
8,377
75.1%
1997
11,442
9,149
80.0%
8,663
75.7%
1998
11,868
9,460
79.7%
8,933
75.3%
1999
12,868
10,311
80.1%
9,801
76.2%
2000
13,980
11,142
79.7%
10,482
75.0%
Source: CRS analysis of the Current Population Survey, various years.
Note: Annual earnings have been adjusted to 2000 dollars based on the wage component of
the Employment Cost Index.

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CRS-20
Pension Participation by Full-Time vs. Part-Time Employment.
Table 8 compares pension coverage statistics for year-round, full-time workers to
those of workers who were employed part-year or part-time. Workers with part-year
or part-time employment are much less likely to be employed by a firm that sponsors
a retirement plan. Part-time and part-year workers also are less likely to participate
if their employer sponsors a plan.
Between 1991 and 2000, the proportion of part-time or part-year workers
employed by firms that sponsored a pension or retirement savings plan rose from
37.1% to 45.5%. The rate of participation among part-year and part-time workers
whose employer sponsored a retirement plan increased from 22.2% to 27.0%. In
both 1991 and 2000, approximately 60% of part-time or part-year workers whose
employers sponsored a retirement plan participated in the plan.20 The proportion of
year-round, full-time workers employed at firms that sponsored a pension or
retirement savings plan rose from 63.3% in 1991 to 66.5% in 2000. The participation
rate among year-round, full-time workers whose employer sponsored a retirement
plan increased from 55.3% in 1991 to 57.7% in 2000.
The lower rate of pension coverage among part-year and part-time workers is
one of the reasons that women are less likely than men to be covered by a pension or
retirement savings plan. As was shown in Table 4, there is little difference in pension
participation between men and women who work year-round, full-time. Women,
however, are more likely than men to work part-year or part-time. Data from the
Current Population Survey show that in 2000, 84% of working men between the ages
of 25 and 64 were employed year-round, full-time compared to 66% of working
women in this age-group. Consequently, while women who worked full-time in 2000
were almost as likely as their male counterparts to have participated in a retirement
plan (56% vs. 59%), the pension participation rate among all women 25 to 64 years
old who worked in the private sector in 2000 was significantly lower (45.5%) than the
pension participation rate among all working men in that age group (54.5%).21
20In 1991, the participation rate was .222/.371 = .598. In 2000, the participation rate was
.270/.455 = .593.
21CRS estimates based on the March 2001 CPS. (Not shown in accompanying tables).

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CRS-21
Table 8. Participation in Pension or Retirement Savings Plans
by Full-Time vs. Part-Time Employment
(Private-sector non-agricultural workers, ages 25 to 64)
Workers
Employer sponsors plan
Employees participating
(thousands)
Workers
Percent
Participants
Percent
Full-time
1991
52,954
33,541
63.3%
29,294
55.3%
1992
53,768
34,209
63.6%
29,676
55.2%
1993
54,954
34,092
62.0%
29,636
54.0%
1994
57,156
37,080
64.9%
32,043
56.1%
1995
60,687
38,344
63.2%
33,298
54.9%
1996
63,144
41,149
65.2%
35,535
56.3%
1997
64,002
41,855
65.4%
36,184
56.5%
1998
65,934
44,095
66.9%
38,092
57.8%
1999
67,065
44,794
66.8%
38,901
58.0%
2000
68,911
45,813
66.5%
39,728
57.7%
Part-time
1991
24,797
9,186
37.1%
5,500
22.2%
1992
24,259
9,052
37.3%
5,194
21.4%
1993
23,922
8,605
36.0%
5,025
21.0%
1994
23,840
9,347
39.2%
5,261
22.1%
1995
23,790
9,348
39.3%
5,508
23.2%
1996
24,022
9,673
40.3%
5,406
22.5%
1997
23,508
9,774
41.6%
5,465
23.3%
1998
21,937
9,679
44.1%
5,615
25.6%
1999
21,815
9,166
42.0%
5,562
25.5%
2000
21,039
9,570
45.5%
5,677
27.0%
Source: CRS analysis of the Current Population Survey, various years.
Policy Implications: Promoting Savings and
Plan Sponsorship
Promoting Retirement Savings. Employers, financial institutions, and
government agencies can play an important role in raising pension participation rates
by educating employees about the importance of saving for retirement. The
educational role that these institutions might play was discussed at the first National
Summit on Retirement Savings, held in Washington, DC in June 1998. The summit,
which was held in accordance with the Savings Are Vital to Everyone’s Retirement
(SAVER) Act of 1997 (P.L. 105-92), brought together individuals from government,
financial services firms, research and educational institutions, the media,
representatives of labor organizations, and employers of all sizes. A second SAVER
summit will be sponsored by the Department of Labor early in 2002.
The Secretary of Labor’s report on the first SAVER summit noted that “we must
do a better job of educating the public — employers and individuals alike — about the
importance of saving . . . to ensure that we can afford to retire and remain financially

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CRS-22
independent.” Among the strategies for which the delegates to the summit were able
to develop a consensus were:
! Expanding the federal government’s role in educating the public about the need
to prepare for retirement through such efforts as the Department of Labor’s
Retirement Savings Education Campaign,
! Encouraging states to initiate their own programs to promote saving for
retirement,
! Urging the media to take greater interest in and more creative approaches to
informing the public about retirement saving,
! Calling on the private sector to support public education through such
programs as the “Choose to Save” campaign undertaken in the Washington,
DC area with funding by Fidelity Investments, and
! Urging employers to sponsor retirement plans.

Promoting Plan Sponsorship. The data presented in this report show a
trend toward increasing sponsorship of retirement plans among small employers.
Surveys of employers by the Bureau of Labor Statistics and of households by the
Bureau of the Census both report gains in retirement plan coverage during the 1990s
among workers employed at firms with fewer than 100 employees. Nevertheless,
both surveys indicate that employees at small firms are much less likely to be covered
by a retirement plan than workers in larger firms. Thus, encouraging small employers
to sponsor a pension or retirement savings plan remains a key issue for policy-makers.
Results of future BLS and Census Bureau surveys will reveal the extent to which the
SIMPLE plans authorized by Congress in 1997 will further encourage small
employers to offer defined contribution pension plans. More recent proposals,
particularly the SAFE and SMART bills, would authorize simplified defined benefit
plans for small firms.
Another issue that these data reveal is the continuing disadvantage that women
face with respect to future pension income because their employment is more likely
to be part-year or part-time. Policies that would encourage pension participation in
retirement plans for workers whose attachment to the labor force is shorter or more
intermittent than that of year-round, full-time workers would help to ensure a more
secure retirement for these workers. Policy options include shortening the maximum
length of time before pension participants are fully vested in their retirement benefits
and promoting portability of retirement benefits.22
Given that employers rely increasingly on defined contribution plans as their main
form of retirement plan, the low rates of participation among workers under age 35
also may be a matter of concern for policy makers. Traditional defined benefit
pensions are usually “back-loaded” in the sense that benefits are based on an
employee’s average earnings during his or her final 3 or 5 years of employment. In
these traditional pension plans, some workers accrue as much as 50% of their total
pension benefit during their final few years of work. Defined contribution plans differ
from DB plans in that workers accrue benefits more evenly throughout their working
22 The maximum vesting period for defined contribution plans has been shortened from 5 years
to 3 years by the Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16).

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CRS-23
lives. A DC pension plan is much like a savings account. Money is deposited each
year, and it is these deposits, plus the interest, dividends, and capital gains they earn
that provide the worker’s retirement income. Thus, a DC pension depends very much
on the effect of compound interest to ensure that the contributions made by the
worker and/or the employer grow to an amount that is sufficient to provide adequate
income during retirement. Consider that $2,000 invested each year at 5.0% interest
beginning at age 25 will have grown to $256,000 by age 65. The same amount
invested at the same rate of interest beginning at age 35 will have grown only to
$142,000 by age 65.
Two other issues of concern raised by the data collected through the CPS are the
below-average rates of pension participation among African-American workers and
among workers with annual earnings of less than $20,000. There is some correlation
between these two statistics, as African-American workers have lower annual earnings
on average than white or other non-white workers. Thus, policies that would
promote increased sponsorship of retirement plans for low-wage workers would likely
have some effect on sponsorship of such plans among employers of minority workers
as well.

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CRS-24
Appendix: Sources of Pension Coverage Data
Data on employer sponsorship and employee participation in pension and
retirement savings plans are available from several sources ways: (1) the Form 5500
is submitted each year to the Internal Revenue Service by employers who sponsor a
retirement plan; (2) surveys of employers are conducted by government agencies,
trade associations, and others interested in pension issues; and (3) surveys of
households are conducted by government agencies and other interested parties. Each
source of data has its own particular strengths and weaknesses.
The IRS Form 5500. All sponsors of employee benefit plans that are subject
to ERISA must file Form 5500 annually with the Internal Revenue Service. Form
5500 must be filed for pension plans whether or not they are “qualified” (tax-exempt),
and regardless of whether benefits continue to accrue or contributions continue to be
made. Plans with fewer than 100 participants file a slightly different form, the 5500-
C/R. The Form 5500 is a rich source of data on the financial characteristics of
employer-sponsored pension plans in the United States. Summaries of the data
collected on the Form 5500 are published periodically by the Department of Labor.23
The data collected include the number of plans of each type, the number of
participants, the number of active participants, contributions to the plans, and the
value of plan assets. Plans are categorized by number of participants, by industry
group, by method of funding, by distribution of assets among types of investment, and
other financial characteristics.
The Form 5500 has two important shortcomings with respect to identifying
trends in the prevalence of pension plan sponsorship and participation. First, data
from the Form 5500 are available only for employers that sponsor a plan and are
required by law to file this form with the IRS. The data cannot be used to compare
firms that sponsor pension plans with firms that do not. Furthermore, the Form 5500
will not be useful for evaluating the impact of SEP and SIMPLE plans on pension
sponsorship and participation because firms sponsoring these plans have been
exempted from filing the form as an incentive for small employers to sponsor such
plans. A second drawback of the Form 5500 is the lag between data collection and
the publication of results. Because of the large volume of information processed and
the need to reject some forms because of errors or omissions, several years elapse
between the date that the forms are submitted and the time that the data become
generally available. (Abstracts from the Form 5500 for calendar year 1997 were
published by the Department of Labor in early 2001.)
Surveys of Employers. The Employee Benefits Survey is conducted by the
Bureau of Labor Statistics of the U.S. Department of Labor. This survey of business
establishments and nonfederal government entities is the source of data for a series
of BLS bulletins on employee benefits. The Employee Benefits Survey (EBS) is one
element of the National Compensation Survey, which also produces the Employment
Cost Index (ECI), a measure of the cost of employee compensation that includes both
23The most recent of these reports is Private Pension Plan Bulletin: Abstract of 1997 Form
5500 Reports, U.S. Department of Labor, Pension and Welfare Benefits Administration,
Washington, DC (Number 10, Winter 2001).

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CRS-25
cash and in-kind compensation. Data from the ECI are widely used among financial
analysts and economists in both government and the private sector, and it has been
designated in federal statute as the basis for computing annual wage adjustments for
civilian federal employees and military personnel.
In even-numbered years, BLS surveys state and local governments and small
private establishments (those with fewer than 100 employees), while in odd-numbered
years the agency surveys medium and large private establishments. The survey of
small private establishments collects data from over 2,100 participating firms, which
in 1996 represented 40 million full-time and 14 million part-time workers in firms with
fewer than 100 employees.24 More than 1,900 establishments participated in the 1997
survey of medium and large employers, representing 38 million full-time and more
than 7 million part-time workers in these establishments. The data collected through
the EBS usually are available more quickly than the plan characteristics submitted on
the Form 5500, but there is a lag of about 2 years between the collection of data and
publication of results. Final results of the 1996 BLS survey of small private
establishments were released in April 1999. Data from the 1997 survey of medium
and large employers were released in September 1999.
Private-sector entities such as trade associations, benefits consultants, and
research institutions also periodically conduct surveys of employers to gather
information about the structure and cost of employee benefits. One such survey cited
in this report is the 2001 Retirement Confidence Survey conducted by the Employee
Benefit Research Institute in association with the American Savings Education
Council and Matthew Greenwald and Associates. This survey was not intended to
collect information about the characteristics of retirement plans, but to gauge the
views and attitudes of small employers regarding retirement plans and related issues.
The survey was conducted by telephone interview in January and February 2001
among approximately 600 companies, of which about half sponsored one or more
retirement plans.
Surveys of Households. The Bureau of the Census conducts the Current
Population Survey each month among a random sample of approximately 50,000
households, mainly to collect information about labor force participation needed to
estimate the national unemployment rate. Each March, supplemental questions are
asked about household economic and demographic characteristics and about
employment and sources of income during the previous calendar year. The survey
includes two questions about pension coverage and participation during the previous
year. Respondents are asked whether any employer for whom they worked had a
pension or other type of retirement plan for any of its employees. Respondents who
answer “yes” to this question are asked whether they were included in the plan. The
data collected in the annual March supplement to the CPS are especially useful for
policy analysis because of the large sample size, the breadth of topics covered, and the
timeliness of the data. The March 2001 CPS includes records for 129,000 people,
including 100,000 people age 15 and older of whom the labor force questions were
asked.
24Independently owned small businesses comprise about three-fourths of this total. The
remainder are branches or small operating units of larger companies.

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CRS-26
The large sample size of the CPS allows estimation of rates of pension
participation based demographic and economic characteristics such as age, gender,
full-time or part-time status, size of firm, and annual earnings. The timeliness of the
CPS data make it useful for analyzing recent trends in pension coverage and
participation. For example, information about pension coverage and participation
during 2000 were collected in March 2001 and were made publicly available in
September 2001. One limitation of the pension data from the March CPS is that only
two questions are asked: whether the individual’s employer offered a retirement plan,
and whether the individual was included in that plan. Among the important questions
not asked as part of the March CPS are 1) whether a participating employee is
covered by a defined benefit or defined contribution plan and 2) why an employee
who is not included in an employer-sponsored plan is not covered by the plan.
The Bureau of the Census, in cooperation with the Social Security
Administration and other agencies, has included special pension-coverage
supplements in the CPS several times over the past 25 years. Special pension surveys
were conducted in 1972, 1979, 1983, 1988, and 1993. Results from the 1993 survey
have been published by Woods (1994), Iams (1995), and EBRI (1997).25 The Census
Bureau also collects information about pension coverage and participation in another
of its household surveys, the Survey of Income and Program Participation (SIPP).
Households are asked to participate in the SIPP over a 32-month period, with
interviews taking place once every 4 months. Beginning with the 1984 survey, and
approximately every two years thereafter, the SIPP has included a series of questions
on pension coverage and participation. Iams (1995) compared the information
collected in the CPS pension supplements with results obtained from the SIPP for the
same years. He concluded that the two surveys produced similar estimates of pension
coverage in 1993 and of the trends in coverage from 1983 to 1993, and suggested
that “the SIPP’s pension information can substitute for specialized studies in the
CPS.” One drawback of the SIPP is that survey results are not released as quickly as
with the CPS due to complex editing procedures required for longitudinal data sets.
Other national surveys conducted by federal agencies also collect information
about participation in employer-sponsored pension and retirement savings plans. Two
that are widely used in public policy research are the Survey of Consumer Finances
(SCF), conducted by the Board of Governors of the Federal Reserve System, and the
Health and Retirement Study (HRS), administered by the U.S. Department of Health
and Human Services. The SCF is conducted every three years by the Federal Reserve
Board in cooperation with the Internal Revenue Service among a sample that varies
in size from about 3,000 to 4,000 households. This survey collects detailed
information on household assets, liabilities, and demographic characteristics. The
HRS is an ongoing study of 12,600 individuals focusing on the transition to
retirement. It comprises a nationally representative sample of people who were
between the ages of 51 and 61 in 1992 and their spouses. These individuals are
interviewed every two years to measure factors that affect work, retirement, health
and financial decisions.
25 More recently, the Census Bureau has collected information on pension coverage in the
Contingent Work Supplements (CWS) to the CPS, conducted in 1995, 1997, and 1999. A
summary of the February 1999 CWS can be found at [http://www.dol.gov/dol/pwba].

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CRS-27
References
Fronstin, Paul and others. EBRI Databook on Employee Benefits, Fourth Edition.
Employee Benefit Research Institute. Washington, 1997.
Iams, Howard M. The 1993 SIPP and CPS Pension Surveys. Social Security
Bulletin, v. 58, no. 4, winter 1995.
Salisbury, Dallas and others. Retirement Confidence Survey 2000, Employee Benefit
Research Institute Issue Brief 222, Washington DC, June 2000
Starr-McCluer, Martha and Annika Sundén. Workers’ Knowledge of their Pension
Coverage: A Reevaluation. Staff paper, Federal Reserve Board of Governors.
Washington, April 1998.
U.S. Department of Labor. ERISA Advisory Council on Employee Welfare and
Benefit Plans. Report of the Working Group on Small Business: How to
Enhance and Encourage the Establishment of Pension Plans. Washington,
November 1998.
U.S. Department of Labor. Pension and Welfare Benefits Administration. PWBA
Advisory Council. Report of the Working Group on the Merits of Defined
Contribution vs. Defined Benefit Plans with an Emphasis on Small Business
Concerns. Washington, November 1997.
U.S. Department of Labor, Bureau of Labor Statistics. Employee Benefits in Small
Private Establishments, 1996. (Bulletin 2507). GPO, Washington, April 1999.
U.S. Department of Labor, Bureau of Labor Statistics. Employee Benefits in
Medium and Large Private Establishments, 1997. (Bulletin 2517). GPO,
Washington, September 1999.
Woods, John R. Pension Coverage Among the Baby Boomers: Initial Findings from
a 1993 Survey. Social Security Bulletin, v. 57, no. 3, fall 1994.

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