Pension Sponsorship and Participation: Summary of Recent Trends

Pension Sponsorship and Participation: Summary of Recent Trends

Pension Sponsorship and Participation:
Summary of Recent Trends
Patrick Purcell
Specialist in Income Security
September 11, 2009
Congressional Research Service
7-5700
www.crs.gov
RL30122
CRS Report for Congress
P
repared for Members and Committees of Congress

Pension Sponsorship and Participation: Summary of Recent Trends

Summary
According to the U.S. Census Bureau’s Current Population Survey (CPS), the number of private-
sector workers between the ages of 25 and 64 whose employer sponsored a retirement plan fell
from 53.5 million in 2007 to 52.3 million in 2008. The number of private-sector workers who
participated in employer-sponsored retirement plans fell from 44.1 million in 2007 to 42.9 million
in 2008. The proportion of all 25 to 64 year-old workers in the private sector, whether employed
full time or part-time, who participated in employer-sponsored retirement plans decreased from
45.1% in 2007 to 43.6% in 2008. Between 2000 and 2008, the number of private-sector workers
between the ages of 25 and 64 who participated in employer-sponsored retirement plans fell by
3.2 million, declining from 46.1 million to 42.9 million. The percentage of workers who
participated in employer-sponsored retirement plans fell from 50.3% in 2000 to 43.6% in 2008.
A CRS analysis of the CPS indicates that, among private-sector workers aged 25 to 64 who were
employed year-round, full-time:
• The percentage of workers whose employer sponsored a retirement plan was
59.9% in 2007 and 59.0% in 2008.
• The percentage of workers who participated in employer-sponsored retirement
plans was 52.0% in 2007 and 51.1% in 2008.
• Only 25.8% of workers at firms with fewer than 25 employees participated in an
employer-sponsored retirement plan in 2008, compared to 45.9% of workers at
firms with 25 to 99 employees and 63.6% at firms with 100 or more employees.
• Among those who were employed year-round, full-time, 51.2% of men and
51.0% of women participated in an employer-sponsored retirement plan in 2008.
• Only 43.3% of private-sector workers aged 25 to 34 and employed year-round,
full-time participated in an employer-sponsored retirement plan in 2008,
compared to 50.9% of workers aged 35 to 44, 55.4% of those aged 45 to 54, and
56.6% of those aged 55 to 64.
• Black, Hispanic, and other non-white workers were less likely to have
participated in an employer-sponsored retirement plan than white, non-Hispanic
workers. Fifty-seven percent of white workers participated in an employer-
sponsored retirement plan in 2008, compared to 45.6% of black non-Hispanic
workers, 30.3% of Hispanic workers, and 47.9% of other non-white workers
(mainly Asian-American and Native American workers).
• Only 27.7% of workers whose annual earnings were in the lowest quartile in
2008 (under $28,000) participated in a retirement plan at work, compared to
68.6% of workers whose earnings were in the top quartile (above $65,000).

The CPS – a survey of households – shows fewer private-sector workers participating in
employer-sponsored retirement plans than are reported by the National Compensation Survey
(NCS), which is a survey of business establishments. According to the CPS, the proportion of
private-sector workers aged 25 to 64 who participated in an employer-sponsored retirement plan
of some kind fell from 45.0% in 2005 to 43.6% in 2008. In contrast, NCS data indicate that 50%
of workers in the private sector participated in employer-sponsored retirement plans in 2005 and
51% of private-sector workers participated in employer-sponsored retirement plans in 2008.
Congressional Research Service

Pension Sponsorship and Participation: Summary of Recent Trends

Contents
Background: Employment and an Aging Workforce .................................................................... 1
Life Expectancy Continues to Increase .................................................................................. 1
Labor Force Participation Begins to Drop After Age 55 ......................................................... 1
Congress and Retirement Income Policies ............................................................................. 2
Two Kinds of Retirement Plans: Defined Benefit and Defined Contribution .......................... 2
Who Bears the Investment Risk? ..................................................................................... 3
The Number of Defined Benefit Plans Is Declining ......................................................... 4
Recent Trends in Retirement Plan Sponsorship and Participation................................................. 4
Plan Participation by Full-Time vs. Part-Time Employment .................................................. 4
Plan Participation by Size of Firm ......................................................................................... 6
Plan Participation Among Men and Women........................................................................... 8
Plan Participation by Employee Age...................................................................................... 9
Plan Participation by Employee Race .................................................................................. 10
Plan Participation by Employee Earnings ............................................................................ 11
Another Measure of Retirement Plan Participation: The National Compensation Survey ........... 13

Tables
Table 1. Labor Force Participation Rates in 2008 by Age and Sex............................................... 2
Table 2. Participation in Retirement Plans by Full-Time vs. Part-Time Employment ................... 6
Table 3. Participation in Retirement Plans by Size of Firm.......................................................... 8
Table 4. Participation in Retirement Plans by Sex ....................................................................... 9
Table 5. Participation in Retirement Plans by Age..................................................................... 10
Table 6. Participation in Retirement Plans by Race ................................................................... 11
Table 7. Participation in Retirement Plans by Annual Earnings ................................................. 13
Table 8. Percentage of Private-Sector Employees Participating in Employer-Sponsored
Retirement Plans .................................................................................................................... 16

Contacts
Author Contact Information ...................................................................................................... 17

Congressional Research Service

Pension Sponsorship and Participation: Summary of Recent Trends

Background: Employment and an Aging Workforce
The aging of the American population has made retirement income an issue of increasing concern
to the Congress and the public. Although Americans are living longer than ever before, most
retire before age 65. Moreover, while the nation’s population continues to grow, the decline in
birth rates that followed the post-World War II “baby boom” and the continued lengthening of life
spans will result in fewer workers relative to the number of retirees. These trends will affect the
economic well-being of future retirees because pensions and Social Security benefits will be paid
over longer periods of time by a working population that is shrinking relative to the number of
retirees and savings will have to be stretched over longer retirements. In addition, it is likely that
fewer future retirees will have income from employer-sponsored defined benefit pensions.
Life Expectancy Continues to Increase
The average life expectancy of Americans born in 1960 was 69.7 years. It has been estimated that
those who are born in 2010 will live for an average of 78.3 years.1 A man who reached age 65 in
1960 could expect to live another 13.0 years, while a woman who turned 65 in 1960 had a
remaining life expectancy of 15.8 years. A man who reached age 65 in 2005 could expect to live
another 16.8 years, while a woman who turned 65 in 2005 had a remaining life expectancy of
19.8 years.2 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 aged 65 or older. In 2010,
there will be 40.2 million Americans aged 65 or older, representing 13.0% of the population. By
2030, according to projections made by the Census Bureau, there will be 72.1 million people aged
65 or older, comprising 19.3% of the U.S. population.3
Labor Force Participation Begins to Drop After Age 55
The proportion of the population that is either working or looking for work is called the “labor
force participation rate.” As indicated by the data in Table 1, the labor force participation rate
starts to drop significantly after age 55. In 2008, 91% of men aged 25 to 54 – including 88% of
those aged 45 to 54 – were working or looking for work in a typical month during the year.
Similarly, 76% of women aged 25 to 54 – including 76% of those aged 45 to 54 – were working
or looking for work in a typical month during the year. Among men aged 55 to 64, only 70%
were employed or looking for work in an average month. Among women aged 55 to 64, just 59%
were working or looking for work in a typical month in 2008.
When income is no longer derived from earnings, individuals depend more on pensions, interest
and dividends, withdrawals from their savings, and—when they become eligible through age or
disability—Social Security. The aging of the U.S. population will place strains on the components
of the traditional “three-legged stool” of retirement income: Social Security, pensions, and
personal saving.

1 U.S. Census Bureau, 2008 National Population Projections, August 2008.
2 U.S. National Center for Health Statistics, National Vital Statistics Reports, United States Life Tables, Vol. 57, No. 1,
August 2008
3 U.S. Census Bureau, 2008 National Population Projections, August 2008
Congressional Research Service
1

Pension Sponsorship and Participation: Summary of Recent Trends

Table 1. Labor Force Participation Rates in 2008 by Age and Sex
Labor Force
Age
Total Number
Number in the
of People (thousands)
Labor Force (thousands)
Participation Rate
(percent)
Men
Age 25 to 54
62,078
56,202
90.5
—Age 45 to 54
21,512
18,928
88.0
Age 55 to 64
16,123
11,345
70.4
Age 65 and up
16,002
3,436
21.5
Women
Age 25 to 54
63,574
48,195
75.8
—Age 45 to 54
22,448
17,075
76.1
Age 55 to 64
17,367
10,270
59.1
Age 65 and up
21,160
2,808
13.3
Source: U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings (January 2009).
Congress and Retirement Income Policies
The Internal Revenue Code was first amended to provide favorable tax treatment for qualified
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 contributions from employer income, exclusion of
employer contributions to pension plans from employee income, and tax exemption of the
earnings of pension trusts.4 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 plans and defining the terms under which tax
exemptions and deductions are granted, federal tax law has both encouraged the growth of
retirement plan coverage among workers and shaped the development of pensions 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 (ERISA, P.L. 93-406). ERISA also 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 fallen.
Two Kinds of Retirement Plans: Defined Benefit and Defined
Contribution
Retirement plans are legally classified as either defined benefit (DB) plans or defined
contribution (DC) plans. In a defined benefit plan, 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.

4 Defined benefit pensions are taxed when the employee receives benefits during retirement.
Congressional Research Service
2

Pension Sponsorship and Participation: Summary of Recent Trends

A defined contribution plan is much like a savings account maintained by the employer on behalf
of each participating employee. The employer and/or the employee contributes a specific dollar
amount or percentage of pay into the account, which is usually invested in stocks and bonds.
When the worker retires, the retirement benefit that he or she receives will be 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 as a lump
sum, a series of fixed payments over a period of years, or in the form of a life annuity.
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. At
retirement, the employee must receive an amount equal to the contributions to the plan plus the
interest that has been credited to the plan. Legally, therefore, a cash balance plan is a defined
benefit plan.
Who Bears the Investment Risk?
In a defined benefit plan, it is the employer who bears the investment risk of the plan, while in a
defined contribution plan it is the employee who bears the investment risk. In a DB 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 the 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. This can be done over a period of years.
In a DC plan, it is the employee who bears the risk that his or her retirement account might not
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 adequate to maintain his or her desired
standard of living. If this situation occurs, the worker might choose to delay retirement.
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 establish or continue a
retirement plan than the potential tax advantages it could gain by sponsoring a plan. Likewise, an
employee’s decision 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 participates in a retirement plan.
Congressional Research Service
3

Pension Sponsorship and Participation: Summary of Recent Trends

The Number of Defined Benefit Plans Is Declining
According to the Pension Benefit Guaranty Corporation (PBGC), the number of PBGC-insured
defined benefit plans fell from 114,396 in 1985 to 29,400 in 2006.5 The number of workers
participating in defined benefit plans fell from 27 million in 1985 to 19.5 million in 2008.6
According to the PBGC, 17% of defined benefit plans, accounting for 8% of plan participants,
have been placed by their sponsors under a “hard freeze.”7 Under a hard freeze, no new
participants are admitted to the plan and current participants do not accrue any additional
benefits. An additional, but not precisely known, number of employees work for employers who
have placed their defined benefit pensions under a “soft freeze.” Under a soft freeze, no new
participants are admitted to the plan but current participants continue to accrue benefits. Watson
Wyatt, the actuarial consulting firm, recently reported that 607 of the 1,000 largest companies in
the United States sponsored defined benefit plans in 2009. Of these 607 firms, 190 (31.3%) had
put their defined benefit pension plans under either a hard freeze or a soft freeze.8
Recent Trends in Retirement Plan Sponsorship and
Participation
Every month, the Census Bureau conducts the Current Population Survey (CPS) among a
nationally representative sample of approximately 97,000 households, primarily for the purpose
of estimating the rates of employment and unemployment. During March of each year, the survey
includes supplemental questions about employment, income, health insurance, retirement plan
participation, and receipt of government benefits during the previous calendar year. This
information allows analysts and researchers to calculate the number and percentage of workers
who reported whether their employer offered a retirement plan and whether they participated in
the plan. Responses can then be categorized by demographic and economic characteristics, such
as the worker’s age, race, sex, income, and the size of firm at which they worked. Unfortunately,
because the CPS asks only two pension-related questions—if the worker’s employer offered a
retirement plan and if the worker was included in the plan—we cannot ascertain from this survey
whether the plan was a defined benefit plan or a defined contribution plan.
Plan Participation by Full-Time vs. Part-Time Employment
The data presented in Table 2 compare retirement plan participation among year-round, full-time
wage-and-salary workers in the private sector with participation among workers who were
employed part-year or part-time. Workers with part-year or part-time employment are much less
likely than full-time workers 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.

5 Pension Benefit Guaranty Corporation, Pension Insurance Data Book 2008.
6 The total number of participants in defined benefit plans insured by the PBGC was 38 million in 1985 and 44 million
in 2008. These figures include workers currently participating in DB plans, individuals who are vested in a former
employer’s plan but are not yet collecting pensions, and retirees collecting pensions from PBGC-insured plans.
7 Pension Benefit Guaranty Corporation, Pension Insurance Data Book 2008.
8 Watson Wyatt Insider, July 2009.
Congressional Research Service
4

Pension Sponsorship and Participation: Summary of Recent Trends

The proportion of year-round, full-time workers employed at firms that sponsored a retirement
plan fell from 59.9% in 2007 to 59.0% in 2008. The participation rate among these workers fell
from 52.0% in 2007 to 51.1% in 2008. Between 1990 and 2000, plan participation among full-
time workers increased from 54.6% to 57.4%. It has since fallen by more than six percentage
points. Between 2007 and 2008, the proportion of part-time or part-year workers employed by
firms that sponsored a retirement plan fell from 38.3% to 37.2%. The percentage of part-year and
part-time workers who participated in employer-sponsored retirement plans was unchanged from
2007 to 2008, at 23.0% in both years.
The lower rate of retirement plan participation among part-year and part-time workers is one of
the reasons that women are less likely than men to have participated in an employer-sponsored
retirement plan. There is little difference in retirement plan participation between men and
women who work year-round, full-time. (See Table 4.) Women, however, are more likely than
men to work part-year or part-time. In 2008, 78.9% of men between the ages of 25 and 64 who
were employed in the private sector worked year-round, full-time compared to 66.4% of working
women in this age-group.9 Consequently, although women who worked full-time in 2008 were as
likely as their male counterparts to have participated in a retirement plan (51.0% of women vs.
51.2% of men), the retirement plan participation rate among all women 25 to 64 years old who
worked in the private sector in 2008 was lower than the participation rate among working men in
that age group. (41.6% of women participated in a retirement plans vs. 45.3% of men.)

9 CRS estimates based on the March 2009 CPS (not shown in accompanying tables).
Congressional Research Service
5

Pension Sponsorship and Participation: Summary of Recent Trends

Table 2. Participation in Retirement Plans by Full-Time vs. Part-Time Employment
(Private-sector wage and salary workers, ages 25 to 64)

Employer Sponsors a Plan
Employee Participates in a Plan
Workers
(thousands)
Workers
Percent
Participants
Percent
Full-Time
1990 53,026
33,323
62.8
28,955
54.6
1995 60,687
38,344
63.2
33,298
54.9
2000 70,177
46,499
66.3
40,304
57.4
2005 72,331
43,195
59.7
37,347
51.6
2006 74,542
42,601
57.2
36,676
49.2
2007 74,588
44,645
59.9
38,756
52.0
2008 72,036
42,525
59.0
36,817
51.1
Part-Time
1990 23,608
8,838
37.4
5,273
22.3
1995 23,790
9,348
39.3
5,508
23.2
2000 21,420
9,708
45.3
5,756
26.9
2005 23,394
9,337
39.9
5,707
24.4
2006 22,660
8,566
37.8
5,287
23.3
2007 23,187
8,891
38.3
5,322
23.0
2008 26,362
9,806
37.2
6,069
23.0
All Workers
1990 76,633
42,161
55.0
34,228
44.7
1995 84,477
47,692
56.5
38,806
45.9
2000 91,597
56,207
61.4
46,060
50.3
2005 95,725
52,532
54.9
43,053
45.0
2006 97,201
51,167
52.6
41,963
43.2
2007 97,775
53,536
54.8
44,078
45.1
2008 98,398
52,331
53.2
42,886
43.6
Source: Congressional Research Service analysis of the Current Population Survey, various years.
Plan Participation by Size of Firm
The data displayed in Table 3 show that from 1990 to 2008, the number of workers between the
ages of 25 and 64 who were employed in the private sector and worked year-round, full-time at
firms of all sizes increased from 53 million to 72 million. At the same time, the number of such
workers whose employer offered a retirement plan increased from 33.3 million to 42.5 million.
The proportion of year-round, full-time workers who were employed at firms that offered a
retirement plan rose from 62.8% in 1990 to 66.3% in 2000. By 2008, it had since fallen to 59.0%.
Retirement plan participation among employees of small firms rose between 1990 and 2000, but
has recently declined, and access to employer-sponsored retirement plans remains substantially
lower in small firms than in firms with 100 or more employees. The data displayed in Table 3
show that since 2000, the proportion of workers in firms with 100 or more workers whose
employer sponsors a retirement plan has fallen from 80.5% to 73.5%. Nevertheless, workers at
large firms remain substantially more likely than employees of small firms to work for an
employer that sponsors a retirement plan. In 2008, 29.3% of full-time workers at firms with fewer
Congressional Research Service
6

Pension Sponsorship and Participation: Summary of Recent Trends

than 25 employees were employed at firms that sponsored a retirement plan, down from 34.2% in
2000. This was still higher than the 25.1% of workers at small firms whose employer sponsored a
retirement plan in 1990. Among workers at firms with 25 to 99 employees, 53.7% were employed
at firms that sponsored a retirement plan in 2008, compared to 58.5% in 2000 and 49.5% in 1990.
Table 3 also shows the percentage of year-round, full-time employees in the private sector who
participated in an employer-sponsored retirement plan.10 This statistic takes into account the
impact of employers that do not sponsor a plan on overall retirement plan 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 retirement plan fell from 52.0% in 2007 to 51.1% in 2008. This
was lower than the participation rates of 57.4% in 2000 and 54.6% in 1990. In firms with fewer
than 25 employees, just 25.8% of full-time employees between the ages of 25 and 64 participated
in a retirement plan in 2008, down from 29.3% in 2000, but higher than the 21.6% who
participated in a plan in 1990. In firms with 25 to 99 employees, retirement plan participation was
45.5% in 2007 and 45.9% in 2008, a statistically insignificant change Both of these participation
rates were lower than the participation rate of 49.4% in 2000, but higher than the 41.7%
participation rate in 1990. Participation in retirement plans among workers in firms with 100 or
more employees fell from 65.4% in 2007 to 63.6% in 2008. The 2008 participation rate was 6.6
percentage points lower than the participation rate of 70.2% in 2000 and 6.2 percentage points
lower than the participation rate of 69.8% in 1990.
Among private-sector workers aged 25 to 64 who were employed year-round, full-time, there was
a net decline of 3.5 million participants in employer-sponsored retirement plans between 2000
and 2008, Of this number 3.3 million (94%) were employed at firms with 100 or more
employees.

10 Not all employees whose employer sponsors a retirement plan are eligible to participate. For example, employees
under age 21, those who have been employed for less than one year, and those who work fewer than 1,000 hours in a
year can be excluded from the plan. Retirement plans also may cover certain positions within a firm but not others.
Congressional Research Service
7

Pension Sponsorship and Participation: Summary of Recent Trends

Table 3. Participation in Retirement Plans by Size of Firm
(Private-sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
Size of Firm
Workers
Employer Sponsors Plan
Employees Participating
(thousands)
Workers
Percent
Participants
Percent
Under 25 Employees
1990 12,119
3,042
25.1
2,619
21.6
1995 14,627
3,715
25.4
3,109
21.3
2000 16,591
5,575
34.2
4,857
29.3
2005 19,200
5,569
29.0
4,851
25.3
2006 19,406
5,160
26.6
4,434
22.9
2007 19,449
5,702
29.3
4,954
25.5
2008 18,752
5,500
29.3
4,833
25.8
25 to 99 Employees
1990
7,892 3,904
49.5
3,291 41.7
1995
9,108 4,923
54.1
4,188 46.0
2000 10,492
6,139
58.5
5,186
49.4
2005 11,214
5,975
53.3
5,070
45.2
2006 11,489
5,829
50.7
4,889
42.6
2007 11,367
6,041
53.1
5,166
45.5
2008 10,865
5,837
53.7
4,985
45.9
100 or More Employees
1990 33,014
26,378
79.9
23,045
69.8
1995 36,951
29,706
80.4
26,000
70.4
2000 43,094
34,692
80.5
30,262
70.2
2005 41,917
31,562
75.5
27,425
65.4
2006 43,646
31,612
72.4
27,353
62.7
2007 43,772
32,903
75.2
28,636
65.4
2008 42,418
31,188
73.5
26,998
63.6
All Firms
1990 53,026
33,323
62.8
28,955
54.6
1995 60,687
38,344
63.2
33,298
54.9
2000 70,177
46,499
66.3
40,304
57.4
2005 72,331
43,195
59.7
37,347
51.6
2006 74,542
42,601
57.2
36,676
49.2
2007 74,588
44,645
59.9
38,756
52.0
2008 72,036
42,525
59.0
36,817
51.1
Source: CRS analysis of the Current Population Survey, various years.
Plan Participation Among Men and Women
Table 4 shows the rates of participation in employer-sponsored retirement plans by men and
women between the ages 25 and 64 who were employed in the private sector and worked year-
round, full-time. Between 1990 and 2000, the proportion of men whose employer sponsored a
retirement plan rose from 63.3% to 66.2%. By 2008, it had dropped to 58.3%. The proportion of
women who worked at firms that sponsored a retirement plan increased from 62.1% in 1990 to
66.4% in 2000. In 2008, 60.1% of women who worked year-round, full-time were employed at
firms that sponsored a retirement plan. Thus, in 2008 women who were employed year-round,
Congressional Research Service
8

Pension Sponsorship and Participation: Summary of Recent Trends

full-time were more likely than men to have worked for an employer that sponsored a retirement
plan. Men and women, however, were almost equally likely to have participated in an employer-
sponsored retirement plan. In 2008, 51.2% of men who were employed year-round, full-time
participated in an employer-sponsored retirement plan, compared to 51.0% of women. Both of
these participation rates were lower than the 2000 participation rates of 58.3% for men and 56.1%
for women. The participation rate for men was 7.1 percentage points lower in 2008 than in 2000.
The participation rate for women was 5.1 percentage points lower in 2008 than in 2000.
Table 4. Participation in Retirement Plans by Sex
(Private-sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
Workers
Em

ployer Sponsors Plan
Employees Participating
(thousands)
Workers
Percent
Participants
Percent
Men
1990 32,208
20,389
63.3
18,242
56.6
1995 36,504
23,008
63.0
20,359
55.8
2000 41,516
27,463
66.2
24,220
58.3
2005 42,881
25,136
58.6
22,021
51.4
2006 44,210
24,898
56.3
21,616
48.9
2007 43,844
25,897
59.1
22,600
51.6
2008 42,120
24,541
58.3
21,555
51.2
Women
1990 20,817
12,934
62.1
10,713
51.5
1995 24,182
15,336
63.4
12,939
53.5
2000 28,661
19,036
66.4
16,083
56.1
2005 29,450
18,059
61.3
15,326
52.0
2006 30,332
17,703
58.4
15,060
49.7
2007 30.744
18,749
61.0
16,156
52.6
2008 29,916
17,984
60.1
15,261
51.0
Source: Congressional Research Service analysis of the Current Population Survey, various years.
Plan Participation by Employee Age
Table 5 displays rates of participation in employer-sponsored retirement plans among workers
who were employed in the private sector and worked year-round, full-time, according to their age.
Young workers—aged 25 to 34—were less likely than middle-aged and older workers to be
employed at a firm that sponsored a retirement plan in 2008. They also were less likely to have
participated in a retirement plan than older workers. In 2008, 54.4% of workers 25 to 34 years old
worked for an employer that sponsored a retirement plan, and 43.3% of workers in this age group
participated in an employer-sponsored plan. Thus, 79.6% of those aged 25 to 34 who worked for
a firm that sponsored a plan participated in the plan (0.433/0.544 = 0.796). In contrast, among
workers 55 to 64 years old, 61.7% worked at firms that sponsored a retirement plan, and 56.6%
participated in an employer-sponsored plan. Thus, among workers aged 55 to 64 who worked for
a firm that sponsored a retirement plan, 91.7% participated in the plan (0.566/0.617 = 0.917).11

11 Some of the difference in participation rates is because workers under 35 are somewhat more likely to be in their first
year with an employer and can be excluded from participating in the plan. Employees who work fewer than 1,000
(continued...)
Congressional Research Service
9

Pension Sponsorship and Participation: Summary of Recent Trends

Table 5. Participation in Retirement Plans by Age
(Private-sector wage and salary 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
1990 19,344
11,489
59.4
9,135 47.2
1995 19,759
11,673
59.1
9,337 47.3
2000 20,398
12,803
62.8
10,173 49.9
2005 19,677
10,577
53.8
8,268 42.0
2006 20,359
10,648
52.3
8,371 41.1
2007 20,053
10,895
54.3
8,625 43.0
2008 19,234
10,458
54.4
8,325 43.3
35 to 44
1990 16,989
11,042
65.0
9,871 58.1
1995 20,439
13,235
64.8
11,742 57.5
2000 23,362
15,479
66.3
13,559 58.0
2005 21,688
12,893
59.5
11,289 52.1
2006 21,875
12,313
56.3
10,781 49.3
2007 21,448
12,793
59.7
11,119 51.8
2008 20,214
11,926
59.0
10,295 50.9
45 to 54
1990 10,922
7,148
65.5
6,586 60.3
1995 14,042
9,240
65.8
8,381 59.7
2000 18,489
12,951
70.1
11,787 63.8
2005 20,466
12,995
63.5
11,686 57.1
2006 21,188
12,959
61.2
11,542 54.5
2007 21,265
13,449
63.2
12,200 57.4
2008 20,645
12,772
61.9
11,433 55.4
55 to 64
1990 5,771 3,644
63.1
3,363 58.3
1995 6,446 4,196
65.1
3,838 59.5
2000 7,929 5,267
66.4
4,785 60.3
2005 10,500
6,730
64.1
6,104 58.1
2006 11,120
6,681
60.1
5,981 53.8
2007 11,821
7,508
63.5
6,812 57.6
2008 11,943
7,369
61.7
6,765 56.6
Source: CRS analysis of the Current Population Survey, various years.
Plan Participation by Employee Race
The March 2003 CPS introduced newly expanded categories of race and ethnicity, making
comparisons with prior years problematic. In Table 6, race and ethnicity are categorized as white

(...continued)
hours in a year and those under age 21 also can be excluded from participating, but neither group is represented in
Table 5.
Congressional Research Service
10

Pension Sponsorship and Participation: Summary of Recent Trends

non-Hispanic, black non-Hispanic, Hispanic, and other. The “other” category includes mainly
persons whose heritage is Asian, Native American, Eskimo, or Pacific Islander. In 2008, the
likelihood of being employed at a firm that sponsored a retirement plan was highest for white
non-Hispanic workers and lowest for Hispanic workers. Black non-Hispanic workers and
“Asian/Other” workers were about equally likely to have worked for an employer that sponsored
a retirement plan. Among white non-Hispanic workers, 64.2% worked for an employer that
sponsored a retirement plan, and 56.6% participated in an employer-sponsored plan. Among
Hispanic workers, just 38.0% worked for an employer that sponsored a retirement plan and only
30.3% participated in an employer-sponsored retirement plan. Of workers who classified their
race and ethnicity as black non-Hispanic, 55.9% worked for an employer that sponsored a plan
and 45.6% participated in a plan, while among Asian-American and other workers, 56.0% worked
for an employer that sponsored a retirement plan and 47.9% participated in a plan.
Table 6. Participation in Retirement Plans by Race
(Private sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
Employer Sponsors Plan
Employees Participating
Employee
Workers
Race
(thousands)
Workers
Percent
Participants
Percent
White, Non-Hispanic
2002
49,012 32,711
66.7
28,836 58.8
2005
49,952 32,490
65.0
28,618 57.3
2006
50,627 31,740
62.7
27,817 55.0
2007
50,835 33,251
65.4
29,291 57.6
2008
49,297 31,642
64.2
27,899 56.6
Black, Non-Hispanic
2002 7,078
4,156
58.7
3,363
47.5
2005 7,511
4,295
57.2
3,491
46.5
2006 7,927
4,224
53.3
3,468
43.8
2007 7,805
4,499
57.6
3,675
47.1
2008 7,470
4,176
55.9
3,408
45.6
Hispanic
2002 8,942
3,582
40.1
2,777
31.1
2005 10,208
3,775
37.0
2,964
29.0
2006 10,982
3,843
35.0
3,032
27.6
2007 10,834
4,065
37.5
3,310
30.6
2008 10,262
3,902
38.0
3,110
30.3
Other
2002 4,062
2,356
58.0
1,996
49.2
2005 4,660
2,636
56.6
2,274
48.8
2006 5,007
2,794
55.9
2,358
47.1
2007 5,114
2,830
55.4
2,481
48.5
2008 5,007
2,805
56.0
2,399
47.9
Source: Congressional Research Service analysis of the Current Population Survey, various years.
Plan Participation by Employee Earnings
Table 7 shows the relationship between earnings and participation in an employer-sponsored
retirement plan. In Table 7, workers’ annual earnings from wages and salaries—as reported on
Congressional Research Service
11

Pension Sponsorship and Participation: Summary of Recent Trends

the CPS—are ranked by quartile. In 2008, one-quarter of private-sector wage and salary workers
between the ages of 25 and 64 who were employed year-round, full-time earned more than
$65,000. Another quarter had earnings between $41,000 and $65,000. The next quartile had
earnings between $28,000 and $41,000, and those in the lowest quartile earned less than $28,000.
In 2008, 72.9% of year-round, full-time workers in the private sector with annual earnings in the
top quartile were employed by firms that sponsored a retirement plan, and 68.6% of workers in
the top earnings quartile participated in a retirement plan. Both of these percentages were lower
than the rates in 2000 and 1990. In 2000, 80.2% of year-round, full-time workers in the private
sector with annual earnings in the top quartile were employed by firms that sponsored a
retirement plan, and 75.5% of workers in the top earnings quartile participated in a retirement
plan. The equivalent sponsorship and participation rates in 1990 were 77.9% and 73.7%,
respectively.
The percentage of workers employed at firms that sponsored a retirement plan and the percentage
who participated in these plans were progressively lower in each of three lowest earnings
quartiles. For example, among workers in the lowest earnings quartile in 2008, 38.4% were
employed at firms that sponsored a retirement plan, and 27.7% of workers in the bottom quartile
participated in a retirement plan. Both of these percentages were lower than the comparable rates
in 2000 and 1990. In 2000, 44.9% of year-round, full-time workers in the private sector with
annual earnings in the bottom quartile were employed by firms that sponsored a retirement plan,
and 32.1% of workers in the bottom earnings quartile participated in a retirement plan. The
equivalent sponsorship and participation rates in 1990 were 41.2% and 30.3%, respectively.
Low-wage workers are not only less likely to work for an employer that sponsors a retirement
plan; they also are less likely to participate if a plan is offered. Among employees whose earnings
in 2008 were in the top quartile, 72.9% worked for an employer that sponsored a retirement plan
and 68.6% participated in a retirement plan. Therefore, the participation rate among employees in
the top earnings quartile whose employer sponsored a retirement plan was 94.1% (0.686/0.729 =
0.941). Among workers whose 2008 earnings were in the bottom quartile, only 38.4% worked for
an employer that sponsored a retirement plan and just 27.7% participated in a retirement plan.
Thus, the participation rate among low-wage employees whose employer sponsored a retirement
plan was 72.1% (0.277/0.384 = 0.721).
Congressional Research Service
12

Pension Sponsorship and Participation: Summary of Recent Trends

Table 7. Participation in Retirement Plans by Annual Earnings
(Private-sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
Employer Sponsors Plan
Employee Participates
Worker’s Annual Earnings
Percentage of Workers
Percentage of Workers
Highest Earnings Quartile
1990 77.9
73.7
1995 77.1
73.0
2000 80.2
75.5
2005 74.4
70.3
2006 70.9
66.7
2007 73.8
69.2
2008 72.9
68.6
Second-Highest Earnings Quartile
1990 72.0
64.2
1995 72.4
65.1
2000 74.3
67.1
2005 68.6
61.5
2006 66.8
59.9
2007 69.4
62.8
2008 67.3
60.1
Third-Highest Earnings Quartile
1990 61.3
51.4
1995 61.0
51.3
2000 66.0
55.5
2005 59.0
49.8
2006 56.2
46.3
2007 59.1
49.7
2008 59.2
49.7
Lowest Earnings Quartile
1990 41.2
30.3
1995 42.4
30.4
2000 44.9
32.1
2005 39.0
27.5
2006 36.6
26.2
2007 38.4
27.7
2008 38.4
27.7
Source: CRS analysis of the Current Population Survey, various years.
Another Measure of Retirement Plan Participation:
The National Compensation Survey
The Bureau of Labor Statistics collects data from employers about paid leave, health insurance,
retirement plan participation, flexible spending accounts, and other employee benefits as part of
Congressional Research Service
13

Pension Sponsorship and Participation: Summary of Recent Trends

the National Compensation Survey (NCS). This survey is conducted annually among a nationally
representative sample of private-sector business establishments.12 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. An establishment might be a branch or small operating
unit of a larger firm. In contrast, a firm comprises all of the establishments that together form a
corporation, partnership, or other business entity.13
According to the data collected from employers through the National Compensation Survey, 51%
of workers in the private sector participated in employer-sponsored retirement plans in March
2008. (See Table 8.) Twenty percent of private-sector workers participated in defined benefit
plans and 43% participated in defined contribution plans. Approximately 12% of private-sector
workers participated in both types of plan. The NCS indicates that 67% of employees in
establishments with 100 or more workers participated in an employer-sponsored retirement plan
in March 2008, while only 37% of employees at establishments with fewer than 100 employees
participated in an employer-sponsored retirement plan. The data from the NCS also indicate that
among full-time workers, 60% participated in an employer-sponsored retirement plan in March
2008, compared to just 24% of part-time workers.
While it is not necessarily surprising that the retirement plan participation rates reported by the
NCS differ from those of the CPS, nor that the NCS shows higher rates of participation, in recent
years the difference in the results shown by the two surveys has increased. Since the NCS was
first fielded in its current form in 2003, it has indicated a small increase in retirement plan
participation, whereas the CPS data indicate that retirement plan participation has been falling
over the same period of time. In 2003, the NCS indicated that 49% of private-sector workers
participated in a retirement plan whereas the CPS data showed a participation rate of 47% for that
year. This two percentage point difference was small enough to be inconsequential for most
analytical purposes. The March 2008 NCS, however, indicated that the proportion of private-
sector workers participating in employer-sponsored retirement plans had risen to 51%, whereas
the March 2009 CPS (which asked about retirement plan participation in 2008) showed that
participation in retirement plans among private sector workers had fallen to 43%. The increase in
the difference in participation rates between the two surveys is troubling for policy analysts
because it complicates the process of estimating both the proportion of workers without
employer-sponsored retirement plans and the trend in retirement plan participation rates.
Analysts might reasonably expect that in any given year the NCS would show a higher rate of
retirement plan participation than the CPS because the business owners and benefits specialists
who are interviewed for the NCS might have greater knowledge about the retirement benefits
they offer than the household members who are interviewed for the CPS. Although this could
explain why the NCS would show a higher participation rate than the CPS in any given year, it
cannot explain why the difference between the two surveys has grown over time.
Some of the increase in the difference in retirement plan participation rates reported by the NCS
and the CPS could be due to trends in the realm of defined benefit plans, particularly the
significant increase in recent years in the number of DB plans that have been “frozen” by

12 For more information on the National Compensation Survey, see U.S. Department of Labor, National Compensation
Survey, Employee Benefits in the United States, March 2008, available at http://www.bls.gov/ncs/ebs/sp/ebnr0014.pdf.
13 In the Census Bureau’s Current Population Survey, employer characteristics are reported at the level of the firm,
which may include more than one establishment.
Congressional Research Service
14

Pension Sponsorship and Participation: Summary of Recent Trends

employers. As was noted earlier, the PBGC has reported that 17% of all insured DB plans were
under a hard freeze in 2008. The consulting firm Watson Wyatt has found that 190 of the 607
companies (31%) in the Fortune 1000 that sponsor defined benefit plans had placed their plans
under either a hard freeze or a soft freeze as of July 2009.
Employees of a firm that sponsors a DB plan, but who are unable to participate because of either
a hard freeze or a soft freeze, would probably report on the CPS that they do not participate in a
retirement plan (unless they participate in a defined contribution plan). Even some participants in
plans that have been frozen might report on the CPS that they do not participate in a plan if they
are no longer accruing benefits under the plan because of a hard freeze and they participate in no
other plan. The employer of such an individual, however, would likely report that the employee
participates in a DB plan because he or she has previously accrued benefits under the plan, and
also because the employer is required to continue to fund the plan even if future benefit accruals
have been frozen.
It is also possible that the proportion of private-sector workers – especially younger workers –
who know whether their employer sponsors a DB may be falling, As the number of DB plans has
fallen and as 401(k) plans have become the most prevalent form of employer-sponsored
retirement plan, worker knowledge about DB plans could be decreasing. If a worker is unaware
of an employer’s DB plan – and does not participate in a DC plan – the worker would likely
report on the CPS that he or she does not participate in an employer-sponsored retirement plan.14
One way to assess whether the downward trend in plan participation indicated by the CPS is real
or is the result of problems with the survey would be to compare CPS data from recent years with
results from other household surveys that ask about retirement plan participation, such as the
Survey of Income and Program Participation (SIPP) and the Health and Retirement Study (HRS).
With respect to the National Compensation Survey, in order for the NCS to continue to offer
accurate estimates of the proportion of workers who are accruing benefits under defined benefit
pension plans, the survey will need include a question or questions about whether the DB plans
sponsored by employers are under either a soft freeze or a hard freeze.

14 The Bureau of Labor Statistics recently broadened the definition of access to employer-sponsored retirement plans.
This will affect take-up rates calculated from the NCS but not participation rates, which are the topic of this discussion.
See N. Kramer and A. Zilberman, “New Definitions of Employee Access to Paid Sick Leave and Retirement Benefits
in the National Compensation Survey,” Compensation and Working Conditions Online, December 23, 2008.
Congressional Research Service
15

Pension Sponsorship and Participation: Summary of Recent Trends

Table 8. Percentage of Private-Sector Employees Participating
in Employer-Sponsored Retirement Plans

Type of Retirement Plan
All Types
Defined Benefit
Defined Contribution
Establishment Size
1-99 Workers
March
2003
35
8
31
March
2004
37
9
32
March
2005
37
9
32
March
2006
37
9
33
March
2007
37
9
33
March
2008
37
9
33
100 or More Workers
March
2003
65
33
51
March
2004
67
34
53
March
2005
67
36
53
March
2006
67
33
54
March
2007
66
32
53
March
2008
67
33
55
Work Schedule
Full-Time Workers
March
2003
58
24
48
March
2004
60
24
50
March
2005
60
25
50
March
2006
60
23
51
March
2007
60
23
50
March
2008
60
24
51
Part-Time Workers
March
2003
18
8
14
March
2004
20
9
14
March
2005
19
9
14
March
2006
21
8
16
March
2007
23
9
18
March
2008
23
10
18
All Workers
March
2003
49
20
40
March
2004
50
21
42
March
2005
50
21
42
March
2006
51
20
43
March
2007
51
20
43
March
2008
51
20
43
Source: U.S. Department of Labor, National Compensation Survey.
Note: Data represent 102 million workers employed in the private sector in 2003 and 107 million workers
employed in the private sector in 2008.

Congressional Research Service
16

Pension Sponsorship and Participation: Summary of Recent Trends

Author Contact Information

Patrick Purcell

Specialist in Income Security
ppurcell@crs.loc.gov, 7-7571

Congressional Research Service
17