Worker Participation in Employer-Sponsored
Pensions: A Fact Sheet

John J. Topoleski
Analyst in Income Security
March 26, 2014
Congressional Research Service
7-5700
www.crs.gov
R43439


Worker Participation in Employer-Sponsored Pensions: A Fact Sheet

his fact sheet provides data on the percentage of American workers who have access to
and who participate in employer-sponsored pension plans. The data are from the National
TCompensation Survey (NCS), which is conducted by the Bureau of Labor Statistics
(BLS).1 The NCS provides data on occupational earnings and the availability of employee
benefits among U.S. workers.
Worker Participation in Employer-Sponsored Pensions
A pension is a voluntary benefit offered by some employers in which employees and employers
defer current wages to receive 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.) DC pension plans are more
common than DB pension plans.
In DB pension plans, participants receive monthly payments in retirement that are based on a
formula that typically uses a combination of length of service, accrual rate, and average of final
years’ salary. 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 highest five years
pay.3
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 contribution 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.4
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.
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,

1 The webpage for the NCS is http://www.bls.gov/ncs/home.htm.
2 For example, a pension plan is qualified if it meets Internal Revenue Code requirements with respect to plan
participation, vesting of benefits, and distribution of benefits. See 26 U.S.C. § 401(a). Qualified plans are eligible for
favorable tax treatment, such as deferred taxes on contributions and earnings.
3 A worker with 20 years of service covered by a DB plan that has accrual rate of 1.5% that is based on an average of
the worker’s highest five years of salary of $50,000 would receive a pension benefit of $50,000 x 20 x .015 = $15,000
per year.
4 Except for the TSP, which is sponsored by the federal government, the plans are named for the section of the Internal
Revenue Code that authorizes the plan. Private-sector employers sponsor 401(k) plans, public school systems and non-
profit organizations sponsor 403(b) plans, and state and local governments sponsor 457(b) plans. For more information,
see http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1 or CRS Report R40707, 401(k)
Plans and Retirement Savings: Issues for Congress
, by John J. Topoleski.
Congressional Research Service
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Worker Participation in Employer-Sponsored Pensions: A Fact Sheet

among workers that have access to a DB plan, the take-up rate is 93%.5 Among workers that have
access to a DC plan, the take-up rate is 69%. Among the reasons for the lower take-up rates for
DC plans compared with DB plans are 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 participate6 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.7
The data in Table 1 are classified by a variety of attributes that highlight differences in pension
plan participation rates among workers. Key distinctions in the data include
• A greater percentage of full-time workers participate in pension plans compared
with part-time workers. Among full-time civilian workers, 65% participate in a
pension plan; among part-time civilian workers, 21% participate in a pension
plan.8
• A greater percentage of public-sector workers participate in pension plans
compared with private-sector workers. Public-sector workers are more likely to
participate in DB pension plans whereas private-sector workers are more likely to
participate in DC pension plans.9
• Participation rates increase as workers’ wages increase. For example, 18% of
private-sector workers in occupations with the lowest 25% of average wages
participate in employer-sponsored pensions whereas 75% of workers in
occupations in the highest 25% of average wages do.
• Participation rates increase as the size of workers’ firms increase. For example,
32% of private-sector workers in firms with less than 50 employees participate in
employer-sponsored pensions whereas 76% of workers in firms with 500 or more
employees
do.

5 The access rate for civilian workers in DB plans is 28% and the participation rate is 26%, which means that 93% (or
26% / 28%) of workers participate in a DB plan to which they have access. U.S. Department of Labor (DOL) data in
2011 indicated that among private-sector workers who participated in DB plans, 4% were required to make an
employee contribution to the plans. Among public-sector workers who participated in DB plans, 79% were required to
make a contribution to their DB pension plans. See U.S. Department of Labor and U.S. Bureau of Labor Statistics,
National Compensation Survey: Employee Benefits in the United States, March 2011 (Bulletin 2771), September 2011,
at http://www.bls.gov/ncs/ebs/benefits/2011/ebbl0048.pdf.
6 An increasing number of DC plans have automatic enrollment, in which new participants are deemed to participate in
the DC plan to which they have access to unless they opt-out of the plan. Evidence suggests that about 10% of
employees opt-out of automatic enrollment DC plans. See, for example, WorldatWork and the American Benefits
Institute, Trends in 401(k) Plans and Retirement Rewards, March 2013, http://www.worldatwork.org/waw/adimLink?
id=71489.
7 Workers who do not participate in DC plans for which they are eligible lose (1) the tax benefits from saving in a
401(k) plan and (2) any up potential employer match to the employee’s contributions. See, for example, James J. Choi,
David Laibson, and Brigitte C. Madrian, “$100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts,”
The Review of Economics and Statistics, vol. 93, no. 3 (August 2011), pp. 748-763.
8 Civilian workers are defined by BLS as all private industry and state and local government workers. Federal
government, military, and agricultural workers are excluded. See http://www.bls.gov/bls/glossary.htm#C.
9 Public-sector workers in the NCS refer to state and local government workers. Nearly all federal civilian employees
are covered by the Civil Service Retirement System (CSRS) or the Federal Employees’ Retirement System (FERS).
For more information, see CRS Report 98-810, Federal Employees’ Retirement System: Benefits and Financing, by
Katelin P. Isaacs.
Congressional Research Service
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Table 1. Access and Participation Rates in Employer-Sponsored Pension Plans
Either Defined Benefit or Defined


Contribution
Defined Benefit
Defined Contribution


Access Participation Access Participation Access Participation
Al
workers 68% 54% 28% 26% 55% 38%
Civilian Workersa
Ful
time
78% 65% 34% 31% 63% 46%
Part
time
37% 21% 12% 9% 29% 14%
Private-Sectorb
Workers
Al
workers 64% 49% 19% 16% 59% 42%
Ful -time
74% 59% 22% 19% 69% 51%
Part-time
37% 20% 9% 7% 31% 15%
Union
94% 86% 72% 68% 55% 44%
Nonunion
61% 45% 13% 11% 60% 42%
Average Wage of Occupation
Lowest 25%
38%
18%
6%
4%
34%
15%
Second 25%
65%
47%
13%
11%
61%
42%
Third 25%
75%
62%
24%
21%
69%
52%
Highest 25%
85%
75%
35%
32%
79%
66%
Number of Employees at Place of Employment
1 to 49
45%
32%
7%
6%
43%
30%
50 to 99
63%
43%
11%
10%
58%
38%
100 to 499
79%
58%
21%
18%
72%
50%
500 workers
87%
76%
46%
41%
78%
61%
CRS-3


Either Defined Benefit or Defined


Contribution
Defined Benefit
Defined Contribution


Access Participation Access Participation Access Participation
Al
workers 89% 85% 83% 78% 32% 15%
Ful
time
99% 94% 92% 87% 36% 17%
State and Localc
Part
time
39% 35% 36% 33% 9% 4%
Government Workers
State
government
93% 87% 86% 78% 43% 22%
Local
government
88% 84% 82% 78% 28% 13%
Source: March 2013 National Compensation Survey (NCS). Data on civilian workers are available at http://www.bls.gov/ncs/ebs/benefits/2013/ownership/civilian/
table02a.htm; private-sector workers at http://www.bls.gov/ncs/ebs/benefits/2013/ownership/private/table02a.htm; and state and local government workers at
http://www.bls.gov/ncs/ebs/benefits/2013/ownership/govt/table02a.htm.
Notes: Definitions are available in the Glossary of Employee Benefit Terms available at http://www.bls.gov/ncs/ebs/glossary20122013.htm and BLS Information Glossary
at http://www.bls.gov/bls/glossary.htm#C.
a. Defined by BLS as all private industry and state and local government workers, excluding federal government, military, and agricultural workers.
b. Referred to in the NCS as private-industry workers, excluding agricultural workers and private households.
c. Referred to in the NCS as public-sector workers, excluding federal workers.

CRS-4

Worker Participation in Employer-Sponsored Pensions: A Fact Sheet


Author Contact Information

John J. Topoleski

Analyst in Income Security
jtopoleski@crs.loc.gov, 7-2290


Congressional Research Service
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