Pension sponsorship and participation: trends and policy issues

Employment sector and employer size account for substantial variation in workers' participation in employer-sponsored retirement plans. Other things being equal, employees in the public sector--that is, federal, state, and local governments--are much more likely to be offered a retirement plan than workers in the private sector. Within the private sector, workers in firms with 100 or more employees are significantly more likely than workers in smaller firms to have the opportunity to participate in a retirement plan. This situation has prompted Congress to seek ways of reducing small businesses' obstacles to pension coverage. For example, Congress has authorized retirement plans that have fewer reporting requirements and less stringent contribution rules than those imposed on larger employers. Evaluating the effect of these laws on pension coverage is complicated by the many other variables that affect an employer's decision to sponsor a retirement plan and a worker's decision to participate in it. Nevertheless, data collected in national surveys of employers and households can be used to establish a baseline against which future changes in retirement plan sponsorship and participation can be measured. Recent surveys of employers and households reveal that: During the 1990s, participation in retirement plans rose among workers in firms with fewer than 100 employees but remained steady among workers in larger firms. The 1990s saw a substantial shift from defined benefit retirement plans to defined contribution plans. Despite increases in participation, workers in firms with fewer than 100 employees are only about half as likely as those in larger firms to participate in an employer-sponsored retirement plan. In both the public and private sectors, part-year or part-time workers are much less likely than year-round, full-time workers to be offered an opportunity to participate in an employer-sponsored retirement plan.