Pension Sponsorship and Participation: Summary of Recent Trends

Pension Sponsorship and Participation:
Summary of Recent Trends
Updated September 8, 2008
Patrick Purcell
Specialist in Income Security
Domestic Social Policy Division

Pension Sponsorship and Participation:
Summary of Recent Trends
Summary
According to the 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 rose from 51.2 million in 2006 to 53.5 million in 2007.
The number of private-sector workers who participated in employer-sponsored
retirement plans rose from 42.0 million in 2006 to 44.1 million in 2007. The
proportion of 25 to 64 year-old workers in the private sector who participated in
employer-sponsored retirement plans increased from 43.2% in 2006 to 45.1% in
2007. Between 2000 and 2007, the number of private-sector workers between the
ages of 25 and 64 who participated in employer-sponsored retirement plans fell from

46 million to 44 million. The percentage of workers who participated in an employer-

sponsored plan fell from 50.3% in 2000 to 45.1% in 2007.
A CRS analysis of the Current Population Survey 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 rose from 57.2% in 2006 to 59.9% in 2007.
^!The percentage of workers who participated in employer-sponsored
retirement plans rose from 49.2% in 2006 to 52.0% in 2007.
^!Only 25.5% of workers at firms with fewer than 25 employees
participated in an employer-sponsored retirement plan in 2007,
compared to 45.5% of workers at firms with 25 to 99 employees and

65.4% of workers at firms with 100 or more employees.

^!Among men and women who were employed year-round, full-time,

51.6% of men and 52.6% of women participated in an employer-

sponsored retirement plan in 2007.
^!Only 43.0% of private-sector workers aged 25 to 34 and employed
year-round, full-time participated in an employer-sponsored
retirement plan in 2007, compared to 51.8% of workers aged 35 to

44, 57.4% of those aged 45 to 54, and 57.6% 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. Fifty-
eight percent of white workers participated in a company-sponsored
retirement plan in 2007, compared to 47.1% of black non-Hispanic
workers, 30.6% of Hispanic workers, and 48.5% of other non-white
workers (mainly Asian-American and Native American workers).
^!Only 27.7% of workers whose earnings were in the lowest quartile
in 2007 (under $27,000) participated in a retirement plan at work,
compared to 69.2% of workers whose earnings were in the top
quartile (above $63,000).
^!The percentage of part-time workers in the private sector whose
employer sponsored a retirement plan rose from 37.8% in 2006 to
38.3% in 2007. Twenty-three percent of part-year or part-time
workers in the private sector participated in an employer sponsored
retirement plan in 2007, essentially unchanged from 2006.

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...................................3
Who Bears the Investment Risk?..............................3
The Number of Defined Benefit Plans Is Declining...................4
Recent Trends in Retirement Plan Sponsorship and Participation............5
Plan Participation by Full-Time vs. Part-Time Employment.............5
Retirement Plans and Employer Size...............................7
Plan Participation Among Men and Women.........................9
Plan Participation by Employee Age..............................10
Plan Participation by Employee Race.............................12
Plan Participation by Employee Earnings..........................14
Another Measure of Retirement Plan Participation:
The National Compensation Survey..............................16
List of Tables
Table 1. Labor Force Participation Rates in 2007.........................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. Employee Participation in Retirement Plans, by Sex...............9
Table 5. Employee Participation in Retirement Plans, by Age..............11
Table 6. Employee Participation in Retirement Plans, by Race..............13
Table 7. Participation in Retirement Plans by Annual Earnings.............15
Table 8. Percentage of Private-Sector Employees Participating in
Employer-Sponsored Retirement Plans............................17

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; savings will have to be stretched over longer
retirements; and Social Security benefits will have to be financed by a working
population that is shrinking relative to the number of retirees.
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 were born in 2005 will live for an average of 77.8
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. 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 2005, there were 36.7 million Americans age 65 or older, representing
12.4% of the population. By 2025, according to projections made by the Bureau of
the Census, there will be 63.5 million people aged 65 or older, comprising 18.2% of
the U.S. population.
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. 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

¹ U.S. National Center for Health Statistics, Vital Statistics of the United States.

strains on the components of the traditional “three-legged stool” of retirement
income: Social Security, pensions, and personal saving.
Table 1. Labor Force Participation Rates in 2007
Total NumberNumber in theLabor Force
Ageof PeopleLabor ForceParticipation Rate
(thousands) (thousands) (percent)
Men
Age 25 to 5462,08156,40890.9
— Age 45 to 54 21,31318,80188.2
Age 55 to 6415,65810,90469.6
Age 65 and up15,5253,18820.5
Women
Age 25 to 5463,61547,94575.4
— Age 45 to 54 22,23116,89676.0
Age 55 to 6416,8769,84658.3
Age 65 and up20,7032,61512.6
^Source:^U^.^S^.^D^e^p^a^r^t^m^eⁿ^t^of^L^a^{bor, Bu}^reau^of^L^a^{bor S}^t^atⁱ^s^tⁱ^c^s^,^Em^pl^oym^e^nt^{and Ear}ⁿⁱ^ngs
^(Jan^u^a^ry^2008).
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 of²
pension trusts. 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 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, 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 fallen.

² Defined benefit pensions are taxed when the employee receives benefits during retirement.

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 the retirement benefit 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 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 a benefit that is equal to the
amount contributed to the plan plus the interest that has been credited to those
contributions. 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 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 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 defined contribution plan, the employer bears no risk beyond an obligation
to make contributions to each employee’s retirement account. 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.
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.
Encouraging sponsorship of retirement plans by small firms is an important
issue to the Congress in part because of the large number of people employed by
small businesses. In 2007, for example, more than 36 million wage and salary
workers were employed by firms with fewer than 25 employees.³ 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 retirement plan sponsorship among small businesses 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).⁴ 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). Nevertheless, rates of retirement plan sponsorship and
participation in small firms continue to lag behind the rates achieved in larger firms.
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 30,328 in 2006.⁵
The decline in the number of DB plans resulted mainly from the termination of a
large number of small plans. Between 1985 and 2006, the number of single-
employer defined benefit pension plans with fewer than 100 participants fell from

³ Full-time and part-time wage and salary workers. (Source: Current Population Survey.)
⁴ P.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.
⁵ Pension Benefit Guaranty Corporation, Pension Insurance Data Book 2006.

90,061 to 18,199, a decline of 80%. The number of large DB plans fell from 22,147
to 10,585, a decline of 52.2%. In recent years, however, several large pension plans
have been terminated, and others have been “frozen” so that participants no longer
accrue pension benefits.
Recent Trends in Retirement Plan Sponsorship
and Participation
Every month, the Bureau of the Census conducts the Current Population Survey
(CPS) among a nationally representative sample of approximately 100,000
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, however, 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
whether the plan is a defined benefit plan or a defined contribution plan.
Plan Participation by Full-Time vs. Part-Time Employment
Table 2 compares 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 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.
The proportion of year-round, full-time workers employed at firms that
sponsored a retirement plan increased from 57.2% in 2006 to 59.9% in 2007. The
participation rate among these workers rose from 49.2% in 2006 to 52.0% in 2007.
Between 1990 and 2000, plan participation among full-time workers increased from
54.6% to 57.4%. It has since fallen by about five percentage points. Between 2006
and 2007, the proportion of part-time or part-year workers employed by firms that
sponsored a retirement plan rose from 37.8% to 38.3%. The participation rate among
part-year and part-time workers whose employer sponsored a retirement plan was
essentially unchanged from 2006 to 2007, at approximately 23% 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 participate in a
company-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

2007, 82.7% of working men between the ages of 25 and 64 were employed year-

round, full-time compared to 68.7% of working women in this age-group.
Consequently, although women who worked full-time in 2007 were as likely as their
male counterparts to have participated in a retirement plan (52.6% of women vs.
51.6% of men), the retirement plan participation rate among all women 25 to 64
years old in the private sector in 2007 was lower than the participation rate among
all working men in that age group.⁶ (43% of women participated vs. 47% of men.)
Table 2. Participation in Retirement Plans
by Full-Time vs. Part-Time Employment
(Private-sector wage and salary workers, ages 25 to 64)
WorkersEmployer Sponsors PlanEmployees Participating
(thousands ) Workers P e rcent P articipant P ercent
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
2001 69,265 45,097 65.1 38,678 55.8
2002 69,093 42,805 62.0 36,973 53.5
2003 69,306 43,450 62.7 37,464 54.1
2004 70,402 43,488 61.8 37,588 53.4
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
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
200123,44910,535 44.96,44427.5
200224,10410,353 43.06,19225.7
2003 23,714 9,868 41.6 5,991 25.3
2004 23,137 9,597 41.5 5,748 24.8
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
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
2001 92,714 55,632 60.0 45,122 48.7
2002 93,197 53,158 57.0 43,165 46.3
2003 93,020 53,318 57.3 43,455 46.7
2004 93,539 53,085 56.8 43,337 46.3
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
^Source:^C^oⁿ^g^r^es^sⁱ^on^{al R}^e^s^earch^Serv^{ice an}^aly^s^is^of^th^e^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^,^va^rⁱ^o^u^{s y}^e^a^r^s.

⁶ CRS estimates based on the March 2008 CPS (not shown in accompanying tables).

Retirement Plans and Employer Size
Data from the CPS show that retirement plan participation in small firms rose
between 1990 and 2000, but has recently declined. The CPS data also indicate that
access to a company-sponsored retirement plan remains substantially lower in small
firms than in firms with 100 or more employees. The data displayed in Table 3 show
that from 1990 to 2007, 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 53.0 million to 74.6 million. At the same time, the number of
such workers whose employer offered a retirement plan increased from 33.3 million
to 44.6 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.
It has since fallen to 59.9%.
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 75.2%. Nevertheless, workers at large firms remain
substantially more likely than employees of small businesses to work for an employer
that sponsors a retirement plan. In 2007, 29.3% of full-time workers in businesses
with fewer than 25 employees were employed at firms that sponsored a retirement
plan, down from 34.2% in 2000. This was still higher than the 25.4% of workers at
small firms whose employer sponsored a retirement plan in 1995. Among workers
in firms with 25 to 99 employees, 53.1% were employed at firms that sponsored a
retirement plan in 2007, compared to 58.5% in 2000 and 54.1% in 1995.
Table 3 also shows the percentage of year-round, full-time employees in the⁷
private sector who participated in an employer-sponsored retirement plan. 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 rose from 49.2% in 2006 to 52.0% in 2007. This was lower than
the participation rates of 57.4% in 2000 and 54.9% in 1995. In firms with fewer than
25 employees, just 25.5% of full-time employees between the ages of 25 and 64
participated in a retirement plan in 2007, down from 29.3% in 2000, but higher than
the 21.3% who participated in a plan in 1995. In firms with 25 to 99 employees,
retirement plan participation rose from 42.6% in 2006 to 45.5% in 2007. This was
lower than the participation rates of 49.4% in 2000 and 46.0% in 1995. Participation
in retirement plans among workers in firms with 100 or more employees also rose
between 2006 and 2007, increasing from 62.7% to 65.4%. This was about five
percentage points lower than the participation rates of 70.2% in 2000 and 70.4% in

1995.

⁷ 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.

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 ofWorkersEmployer Sponsors PlanEmployees Participating
Firm (thousands) Workers P e rcent P articipants P ercent
Under 25 Employees
1990 12,119 3,042 25.1 2,619 21.6
199514,6273,71525.43,109 21.3
200016,5915,57534.24,857 29.3
200117,0615,78833.94,965 29.1
200217,8785,65831.74,880 27.3
200318,6165,85031.45,064 27.2
2004 18,906 5,795 30.7 5,016 26.5
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
25 to 99 Employees
1990 7,892 3,904 49.5 3,291 41.7
19959,1084,92354.14,188 46.0
200010,4926,13958.55,186 49.4
200110,4666,08658.25,067 48.4
200210,7196,03056.35,126 47.8
200310,5406,13358.25,254 49.9
2004 10,532 5,969 56.7 5,121 48.6
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
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
2001 41,739 33,223 79.6 28,645 68.6
2002 40,496 31,116 76.8 26,967 66.6
2003 40,149 31,466 78.4 27,146 67.6
2004 40,964 31,724 77.4 27,452 67.0
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
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
2001 69,265 45,097 65.1 38,678 55.8
2002 69,093 42,805 62.0 36,973 53.5
2003 69,306 43,450 62.7 37,464 54.1
2004 70,402 43,488 61.8 37,588 53.4
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
^Source:^C^R^{S an}^aly^s^is^of^th^e^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^,^va^rⁱ^o^u^{s y}^e^a^r^s.

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%. Since
then, it has dropped to 59.1%. 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 2007,
61.0% of women who worked year-round, full-time were employed at firms that
sponsored a retirement plan. Thus, in 2007 women who were employed year-round,
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 2007, 51.6% of men who
were employed year-round, full-time participated in a company-sponsored retirement
plan, compared to 52.6% 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 6.7 percentage points lower in 2007 than in 2000. The participation
rate for women was 3.5 percentage points lower in 2007 than in 2000.
Table 4. Employee Participation in Retirement Plans, by Sex
(Private-sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
WorkersEmployer Sponsors PlanEmployees Participating
(thousands ) Workers P e rcent P articipants P ercent
Men
1990 32,208 20,389 63.3 18,242 56.6
199536,50423,00863.020,359 55.8
200041,51627,46366.224,220 58.3
200140,97626,53964.823,164 56.5
200240,85125,10061.422,033 53.9
200340,96325,30661.822,083 53.9
2004 41,732 25,190 60.4 22,079 52.9
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
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
2001 28,290 18,558 65.6 15,513 54.8
2002 28,242 17,704 62.7 14,939 52.9
2003 28,342 18,144 64.0 15,381 54.3
2004 28,670 18,298 63.8 15,509 54.1
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
^Source:^C^oⁿ^g^r^es^sⁱ^on^{al R}^e^s^earch^Serv^{ice an}^aly^s^is^of^th^e^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^,^va^rⁱ^o^u^{s y}^e^a^r^s.

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 — ages 25 to 34 — were less likely than
middle-aged and older workers to be employed at a firm that sponsored a retirement
plan in 2007. They also were less likely to participate in retirement plans than are older
workers. In 2007, 54.3% of workers 25 to 34 years old worked for an employer that
sponsored a retirement plan, and 43.0% of workers in this age group participated in a
company-sponsored plan. Thus, 79.2% of those aged 25 to 34 who worked for a firm
that sponsored a plan participated in the plan (0.430/0.543 = 0.792). In contrast,
among workers 55 to 64 years old, 63.5% worked at firms that sponsored a retirement
plan, and 57.6% participated in a company-sponsored plan. Thus, among workers aged
55 to 64 who worked for a firm that sponsored a retirement plan, 90.7% participated
in the plan (0.576/0.635 = 0.907).⁸

⁸ 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 hours in a year and those under age 21
also can be excluded from participating, but neither group is represented in Table 5.

Table 5. Employee Participation in Retirement Plans, by Age
(Private-sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
EmployeeWorkersEmployer Sponsors PlanEmployees Participating
Age (thousands) Workers P e rcent P articipants P ercent
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
2001 19,542 11,908 60.9 9,330 47.7
2002 19,389 11,090 57.2 8,638 44.6
2003 19,288 11,221 58.2 8,822 45.7
2004 19,122 10,878 56.9 8,584 44.9
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
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
2001 22,445 14,841 66.1 12,882 57.4
2002 21,826 13,681 62.7 11,879 54.4
2003 21,328 13,428 63.0 11,609 54.4
2004 21,587 13,314 61.7 11,564 53.6
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
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
2001 18,625 12,650 67.9 11,324 60.8
2002 18,796 12,308 65.5 11,204 59.6
2003 19,227 12,752 66.3 11,521 59.9
2004 19,763 12,827 64.9 11,531 58.4
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
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
2001 8,653 5,698 65.9 5,141 59.4
20029,0825,725 63.05,25257.8
2003 9,463 6,045 63.9 5,512 58.3
2004 9,930 6,470 65.2 5,910 59.5
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
^Source:^C^R^{S an}^aly^s^is^of^th^e^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^,^va^rⁱ^o^u^{s y}^e^a^r^s.

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 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 2007, 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, 65.4% worked for an employer that sponsored
a retirement plan, and 57.6% participated in an employer-sponsored plan. Among
Hispanic workers, just 37.5% worked for an employer that sponsored a retirement plan
and only 30.6% participated in an employer-sponsored retirement plan. Of workers
who classified their race and ethnicity as black non-Hispanic, 57.6% worked for an
employer that sponsored a plan and 47.1% participated in a plan, while among Asian-
American and other workers, 55.4% worked for an employer that sponsored a
retirement plan and 48.5% participated in a plan.

Table 6. Employee Participation in Retirement Plans, by Race
(Private sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
EmployeeWorkersEmployer Sponsors PlanEmployees Participating
Rac e (thousands) Workers P ercent P articipants P ercent
White, Non-Hispanic
2002 49,012 32,711 66.7 28,836 58.8
2003 48,524 32,800 67.6 28,759 59.3
2004 48,618 32,427 66.7 28,522 58.7
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
Black, Non-Hispanic
2002 7,078 4,156 58.7 3,363 47.5
2003 7,241 4,311 59.5 3,555 49.1
2004 7,556 4,570 60.5 3,753 49.7
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
Hispanic
20028,942 3,58240.12,77731.1
20039,073 3,75041.32,95632.6
2004 9,651 3,802 39.4 2,987 31.0
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
Other
2002 4,062 2,356 58.0 1,996 49.2
2003 4,468 2,588 57.9 2,193 49.1
2004 4,578 2,689 58.7 2,326 50.8
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
^Source:^C^oⁿ^g^r^es^sⁱ^on^{al R}^e^s^earch^Serv^{ice an}^aly^s^is^of^th^e^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^,^va^rⁱ^o^u^{s y}^e^a^r^s.

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 the Current Population Survey — are ranked by quartile.
In 2007, 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 $63,000. Another
quarter had earnings between $40,000 and $63,000. The next quarter had earnings
between $27,000 and $40,000, and those in the lowest quartile earned less than
$27,000.
In 2007, 73.8% 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 69.2% of workers in the top earnings quartile participated in a retirement plan.
Both of these percentages were lower than the rates in 2000 and 1995. 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 1995 were 77.1% and 73.0%, 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 2007, 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 1995. 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 1995 were 42.4% and 30.4%,
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 2007 were in the top quartile, 73.8% worked for an
employer that sponsored a retirement plan and 69.2% participated in a retirement plan.
Therefore, the participation rate among employees in the top earnings quartile whose
employer sponsored a retirement plan was 93.8% (0.692/0.738 = 0.938). Among
workers whose 2007 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).

Table 7. Participation in Retirement Plans by Annual Earnings
(Private-sector wage and salary workers, ages 25 to 64, employed year-round, full-time)
Worker’s AnnualEmployer Sponsors PlanEmployee Participates
EarningsPercentage of WorkersPercentage of Workers
Highest Earnings Quartile
199077.973.7
199577.173.0
200080.275.5
200178.273.3
200275.371.0
200377.072.5
200475.871.4
200574.470.3
200670.966.7
200773.869.2
Second-Highest Earnings Quartile
199072.064.2
199572.465.1
200074.367.1
200174.266.7
200270.963.3
200371.063.6
200471.364.1
200568.661.5
200666.859.9
200769.462.8
Third-Highest Earnings Quartile
199061.351.4
199561.051.3
200066.055.5
200163.952.9
200261.351.6
200361.651.7
200460.951.0
200559.049.8
200656.246.3
200759.149.7
Lowest Earnings Quartile
199041.230.3
199542.430.4
200044.932.1
200144.931.5
200241.429.5
200341.228.4
200441.629.9
200539.027.5
200636.626.2
200738.427.7
^Source:^C^R^{S an}^aly^s^is^of^th^e^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^,^va^rⁱ^o^u^{s y}^e^a^r^s.

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 the National Compensation Survey (NCS). This survey
is conducted among a nationally representative sample of private-sector business
establishments.⁹ 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.¹⁰
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 2007. (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 66% of employees in establishments with 100
or more workers participated in an employer-sponsored retirement plan in March 2007,
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 2007, compared to just 23% of part-time workers.
While it is not necessarily surprising that the results of the NCS differ from those
of the CPS, nor that the NCS shows higher rates of participation, it is important to note
that in recent years the difference in the results shown by the two surveys has increased
because the NCS has indicated a generally steady rate of retirement plan participation
whereas the CPS data indicate that retirement plan participation has been falling. As
recently as 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%. This two
percentage point difference was small enough to be inconsequential for most analytical
purposes. The slightly higher rate of participation indicated by the NCS might partly
be due to the fact that the business owners and benefits specialists who are interviewed
for the NCS could be expected to have greater knowledge of employer-provided
benefits than the household members interviewed for the CPS. By March 2007,
however, the NCS indicated that the proportion of private-sector workers participating
in employer-sponsored retirement plans was 51%, whereas the March 2008 CPS
(which asks about pension participation in 2007) showed that participation in
retirement plans among private sector workers had fallen to 45%. The difference in the
results shown by the two surveys can no longer be considered inconsequential, leaving

⁹ For more information on the National Compensation Survey, see U.S. Department of
Labor, National Compensation Survey: Employee Benefits in Private Industry in the United
States, March 2007, available online at [http://www.bls.gov/ncs/ebs/sp/ebsm0006.pdf].
¹⁰ 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.

analysts to question whether one or both surveys have problems related to sample
selection or survey methodology.
Table 8. Percentage of Private-Sector Employees Participating
in Employer-Sponsored Retirement Plans
Type of Retirement Plan
All TypesDefined BenefitDefined Contribution
Establishment Size
1-99 Workers
March 200335831
March 200437932
March 200537932
March 200637933
March 200737933
100 or More Workers
March 2003653351
March 2004673453
March 2005673653
March 2006673354
March 2007663253
Work Schedule
Full-Time Workers
March 2003582448
March 2004602450
March 2005602550
March 2006602351
March 2007602350
Part-Time Workers
March 200318814
March 200420914
March 200519914
March 200621816
March 200723918
All Workers
March 2003492040
March 2004502142
March 2005502142
March 2006512043
March 2007512043
^Source:^{U.S. Dep}^a^r^t^m^eⁿ^t^o^f^L^a^b^o^r^{, Natio}ⁿ^a^{l Co}^m^p^en^satioⁿ^Su^r^v^ey^.
^Note:^{Data repres}^en^t¹^{02 m}^illion^w^o^rk^ers^em^ploy^{ed in}^th^{e priv}^{ate s}^{ector in}^{2003 an}^{d 108 m}^illion
^w^o^rk^ers^em^pl^oy^{ed i}ⁿ^t^h^{e pri}^v^at^{e s}^ect^{or i}ⁿ^2007.