Retirement Plan Participation Falls

Although participation in an employment-based retirement plan increases with age, overall, the percentage of workers participating in an employment-based retirement plan decreased to 39.7% in 2006 from 40.9% in 2005.

Further, participation in employment-based retirement plans fell 2% to 53% among full-time, full-year wage and salary workers between ages 21 and 64 – those considered to have the closest connection with the work force, according to a study published by the Employee Benefit Research Institute (EBRI).

Demographic Statistics

The study, based on U.S. Census Bureau data released earlier this year, the study found that participation increases with age (60% for workers ages 54 – 64, compared with 29% for those 21–24).

Women had a higher level of participation (54%, compared to 51% for men) among full-time, full-year workers. However, among all workers, men had a higher level of participation (40%, compared to 39% for women). Female workers’ lower probability of participation in the aggregate results from their overall lower earnings and/or lower rates of full-time work in comparison with men, EBRI said.

Hispanic wage and salary workers were significantly less likely than both white and black workers to participate in a retirement plan. Native-born Hispanics have participation levels closer to other minority groups. The gap between the percentages of black and white plan participants that exists overall narrows when compared across earnings levels; among workers earning $30,000–$39,999, black and white workers had virtually identical levels of participation.

Wage and salary workers in the South, West, and Southwest had the lowest participation levels (Florida had the lowest at 40%) while the upper Midwest and Northeast had the highest levels (North Dakota had the highest at just over 64%).

The Macro Level

Although individual factors are important, the news release said the study indicated retirement plan participation is “strongly tied” to macro factors, most importantly trends in the labor market. Retirement plan participation trends increased significantly when the labor market was tight in the late 1990s, and decreased when unemployment went up in 2001 and 2002. The participation trend leveled out with a more stable job market in 2003 and 2004, however, even with the stable job market in 2005 and 2006, the participation level declined, the release said.

Craig Copeland, EBRI senior research associate and author of the study, noted in a press release that the adoption of auto enrollment may reverse the downward trend in participation levels.

The study can be found in the November 2007 EBRI Issue Brief, available at