Plan Sponsorship and Participation Are Growing

Since the recession’s end, more employees have been working for companies with a retirement plan and plan participation is up, research finds.

The Employee Benefit Research Institute (EBRI) found that in 2012, 61% of all workers who were age 16 or older worked for an employer or union that sponsored a pension or retirement plan for its employees. This is up from 59% in 2009. In addition, worker participation in a retirement plan increased to 46% in 2012, up slightly from 2009 (45%) but below the level measured in 2003 (48%).

The report also found the vesting rate (the percentage of workers entitled to some pension benefit or lump-sum distribution if they left their job) stood at 43% in 2012, up from 24% in 1979. This increase, said EBRI, is largely due to the increased number of workers participating in defined contribution (DC) retirement plans, such as 401(k)s, where employee contributions are immediately vested, as well as the faster vesting requirements in private-sector pension plans established since 1979.

DC plans were considered the primary retirement plan by 78% of workers with a plan. Defined benefit (pension) plans were the primary plan for 21% of workers, EBRI noted.

The findings also show while the worker participation rates in in salary reduction plans such as 401(k)s has been going up, the average employee contribution to those plans dropped in 2012 (6.7% of salary) from 2009 (7.4% of salary). This is at least partially driven by the growth of automatic enrollment in 401(k) plans, said EBRI, which tend to bring in more first time, lower-income participants but often at lower contribution rates.

The research used data from the U.S. Census Bureau’s latest Survey of Income and Program Participation (SIPP) on retirement plan participation, covering the time period from December 2011 to March 2012. More information about the research can be found in the August issue of EBRI Notes, under the title of “Retirement Plan Participation: Survey of Income and Program Participation (SIPP) Data, 2012,” which can be found here.