Retirement plan coverage in the U.S. is holding fairly steady, while the shift from defined benefit (DB) to defined contribution (DC) coverage continues. In DC plans, workers are more likely to participate and to contribute more as they age, suggesting that many workers manage to save more later in their careers. Nevertheless, to attain retirement security, workers of all ages need to save diligently and take full advantage of employer matching contributions, at a minimum.

This analysis looks at patterns of retirement plan coverage and savings rates among U.S. workers in private sector companies with 500 or more employees, as well as the percentage of pay that employers contributed between 2001 and 2013. The underlying data are from the Survey of Consumer Finances (SCF, 2001, 2004, 2007, 2010 and 2013 waves), which provides comprehensive details of U.S. household finances over time and across demographic groups.

Retirement plan coverage

Overall retirement plan coverage (DB and DC) has remained stable over the last 13 years: 70% in 2001 and 68% in 2013, with the difference more likely due to sampling errors than to a drop in participation (Figure 1).1 DB-only plan coverage continued its longstanding decline — from 16% of workers in 2001 down to 9% in 2013. Dual coverage by both DB and DC plans dropped from 13% to 11%. Over the same period, the percentage of workers covered only by DC plans climbed from roughly 41% to 48%. The gradual expansion of DC plans is the reason retirement plan coverage has held fairly steady despite the falloff in DB plan coverage.2

Figure 1. Retirement plan coverage at current job (%), 2001 – 2013
Figure 1. Retirement plan coverage at current job (%), 2001 – 2013

Note: Observations are weighted to be consistent with the national population.
Source: Estimates from the Survey of Consumer Finances, 2001 – 2013, excluding IRA and Keogh plans

DC plan participation rates — the percentage of workers with DC account balances greater than zero — generally increased with age up to 60 or so (Figure 2). Participation rates among 20-to-29-year-old workers climbed slightly over time, but more could be done to encourage younger workers to start saving for retirement earlier. Workers in their 40s and 50s are typically in their prime earning years, and are more likely both to participate in retirement plans and to save more, according to the SCF.

Figure 2. Percentage of workers participating in DC plans by age, 2001 – 2013
Figure 2. Percentage of workers participating in DC plans by age, 2001 – 2013

Note: Observations are weighted to be consistent with the national population.
Source: Estimates from the Survey of Consumer Finances, 2001 – 2013, excluding IRA and Keogh plans

Employee contributions to DC plans

Average worker contributions to DC plans as a percentage of earnings generally increase with age (Figure 3). Younger workers are probably more constrained financially and less likely to prioritize saving for retirement, particularly as they deal with more immediate financial obligations such as student loans, mortgages and children. Older workers — who likely feel a stronger sense of urgency about saving for retirement — contribute more.

Figure 3. Average worker contributions to DC accounts by age (% of earnings), 2004 – 20133
Figure 3. Average worker contributions to DC accounts by age (% of earnings), 2004 – 2013

Source: Estimates from the Survey of Consumer Finances, 2004 – 2013, excluding IRA and Keogh plans

Employer contributions to DC plans

Average employer contributions to DC plans — defined as a percentage of employees’ pay — have declined over time (Figure 4). Over the same period, however, employer match rates have remained relatively constant (Figure 5). The discrepancy suggests that some workers may be under-contributing and thus not taking full advantage of employer matching. Perhaps the financial squeeze following the 2008 crisis and stagnant wage growth have left many workers with less discretionary income for saving.

Figure 4. Employer contribution rates in DC plans by age (% of pay), 2001 – 2013
Figure 4. Employer contribution rates in DC plans by age (% of pay), 2001 – 2013

Source: Estimates from the Survey of Consumer Finances, 2001 – 2013, excluding IRA and Keogh plans

Figure 5. Employer match rates in DC plans (%), 2004 – 2013
Figure 5. Employer match rates in DC plans (%), 2004 – 2013

Note: Observations are weighted to be consistent with the national population.
Source: Estimates from the Survey of Consumer Finances, 2004 – 2013, excluding IRA and Keogh plans

Conclusion

Retirement plan coverage and contributions from employers and workers evolve along with changing economic and business conditions. Overall retirement plan coverage has remained largely the same over the past decade, and that is not bad news. A more critical question is whether the shift away from DB plans and the expansion of DC plans will do a good job of securing retirement. The adequacy of retirement savings deserves further analysis.


Endnotes

1. Coverage is defined as a retirement plan value of greater than zero.

2. The sum of DB only, DC only, and both DB and DC coverage is less than 100% because some coverage information was missing from the SCF and some workers likely were not covered by employer-sponsored plans.

3. The survey question on individual contribution percentage and the reporting in the public data were different in the 2001 SCF, which is thus not included in Figure 3.