DB and DC Participant Access Update

Private industry workers have a roughly 67% chance of having access to a defined contribution retirement plan and a 15% chance of being offered a defined benefit option, according to the most recent estimates from the U.S. Bureau of Labor Statistics.

Of those workers with DB access, 11% are taking advantage of the benefit, according to the government department. In the DC space, 49% of workers are reportedly saving into the plans. The data, which was released April 19, is drawn from a national compensation survey conducted by the BLS, which is part of the Department of Labor.

The report also highlighted access by industry. Private workers in financial activities, information and manufacturing showed the most access across both DC and DB plans.

Meanwhile, workers in leisure and hospitality had below-average access in both areas, with professional and business services, construction and education and health services showing below-average access to DB plans. Construction was the only other industry showing below-average access to DC plans.

Defined Benefit

Access to DB plans has dropped from 20% availability in 2010 to15% in 2020 and holding steady since then, according to a separate spotlight report by BLS.

Kate Pizzi, a partner and senior consultant at Fiducient Advisors, does note that a shift in how companies are thinking about retirement benefits may be shifting the landscape for DB plans—perhaps in part due to IBM re-opening a once frozen DB.

 “IBM’s recent announcement to re-open their once frozen DB plan via a ‘cash balance’ design signals a potential shift in how companies approach retirement programs,” Pizzi says. “While pension risk transfers are prevalent, and we expect to see them continue, recent legislative changes coupled with a growing focus on attracting and retaining talent may catalyze a reevaluation of defined benefit pension plans, possibly leading to a stabilization or even resurgence in their prevalence.”

Defined Contribution

In the DC space, six out of eight industries have above-average access to saving in the plans, with many industry watchers predicting growth in both access and uptake due in part to the effect of federal and state-level retirement plan legislation, mandates, and tax incentives.

Vincent Smith, partner, defined contribution practice leader along with Pizzi at Fiducient Advisors, expects workplace plan participation rates to increase in coming years in large part due to retirement legislation in the SECURE 2.0 Act of 2023 and state-sponsored retirement plans and mandates.

“Automatic enrollment requirements for new plans, increased access for part-time workers, incentives for small businesses as well as contributing employees are SECURE 2.0 provisions that should lead to increased utilization,” Smith says. “Similarly, offering state-sponsored retirement savings vehicles to workers who do not have access to an employer-sponsored plan should materially improve overall retirement savings.”