A Data and Chart Book. August by Retirement Plan Coverage of Boomers: Analysis of 2003 SIPP Data. Satyendra K. Verma. Satyendra K.

Transcription

1 A Data and Chart Book by Retirement Plan Coverage of Boomers: Analysis of 2003 SIPP Data Satyendra K. Verma by Satyendra K. Verma August 2006

2 August 2006 Components Retirement Retirement Plan Coverage Plan Coverage of Boomers: in 1998: Analysis of 1998 SIPP Data Analysis of 2003 SIPP Data by by Satyendra K. Verma Satyendra K. Verma The AARP Public Policy Institute, formed in 1985, is part of the Policy and Strategy Group at AARP. One of the missions of the Institute is to foster research and analysis on public policy issues of importance to mid-life and older Americans. This publication represents part of that effort. The views expressed herein are for information, debate, and discussion, and do not necessarily represent official policies of AARP. 2006, AARP. Reprinting with permission only. AARP, 601 E Street, NW, Washington, DC

3 Introduction The pension coverage and the retirement prospects of boomers are a growing concern among economists, policy experts, and demographers. This data and chart book is an update of the 2004 version. It replaces the U.S. Bureau of the Census 1998 Survey of Income and Program Participation (SIPP) data with the 2003 SIPP data from its Topical Module of Retirement Expectations and Pension Plan Coverage Wave 7 (February-May 2003). The revised chart book contains data on all types of pension coverage from a worker s current job, coverage from previous job(s), IRAs, and lump-sum payments from retirement plans for a large representative sample of U.S. employees. The book presents various components of retirement coverage among post-boomers (age 16 to 37 in 2003); younger boomers (age 38 to 47 in 2003); older boomers (age 48 to 57 in 2003); pre-retirees (age 58 to 64 in 2003); and retirees (age 65 and older in 2003) as well as among subgroups of this workforce divided by gender, race, income, education, and class of worker. Retirement coverage is defined by three broad measures: Current Pension Coverage pension plan coverage at one s current primary job; Career Pension Coverage coverage obtained at any time during a career (i.e., the current primary job, current secondary job, or any previous job); and Any Coverage retirement plan coverage at any time from any source, including employer-sponsored pension plans during a career, and IRA and Keogh accounts. The purpose of this book is to present data in easy-to-understand tables, charts, and graphs. Most of the tables and graphs are selfexplanatory. Instead of detailed analyses, brief explanations and the main themes are highlighted in a few lines wherever necessary. Retirement coverage of workers at their current jobs is analyzed by various types of pension plans: defined benefit (DB), cash balance (CB), and defined contribution (DC) plans. The book also highlights the retirement coverage from previous employment, lump-sum distributions, pension rollovers, and monthly pensions. In addition, a brief section is devoted to IRAs and the retirement coverage of women by their marital status and race. In 2003, the current pension coverage rate for all workers age 16 and older who had a job or owned a business was 45.7 percent. The rate of coverage during a working career was 54.4 percent, including pension plans from both the current job and previous job(s). When the measure was further expanded to include participation in IRAs or Keogh accounts, the rate of coverage increased to 58.8 percent. i

4 Pre-retirees had the highest rate of retirement plan coverage in 2003 (71.5 percent), followed by older boomers (71.3 percent). Women were less likely to have retirement plan coverage than men regardless of their ages. Nonwhites werealso less likely to have such coverage compared to whites in all age groups. Of particular concern is the low rate of IRA coverage among minorities when compared to whites. Retirement coverage depends highly on personal income level, education, and tenure. Those workers with annual incomes of $30,000 or more were much more likely to have retirement plan coverage than those with incomes of less than $30,000. Low-income workers were most vulnerable to entering retirement without coverage. There has been a shift from DB to DC plans, especially to 401(k) plans. Worker participation in DB plans has been declining since The 2003 SIPP data also presents coverage under CB plans, but only 2.5 percent of workers age 16 and older had such plans. About 57.5 million workers (41.5 percent) were offered DC or 401(k)-type plans but only 53.8 million (38.8 percent) participated in them, 47.2 million (34 percent) contributed to them through payroll deductions, and 39.5 million (28.5 percent) received employer matching contributions. In all age groups, nonwhites and women were somewhat less likely to have DC-only plan coverage than whites and men. Besides current pension coverage, pension coverage from previous jobs is analyzed in this chart book. About 40 million persons in 2003, some of whom might still be in the labor force, had retirement plan coverage from previous employment. The benefit payments from previous pension coverage were either rolled over into other retirement plans, such as IRAs, or were received in the form of lump-sum distributions (LSDs) or annuities. Of all workers who had previous pension plans, 16 million (39 percent) received retirement benefits in the form of LSDs. Of those LSDs recipients, 54 percent, more than half, spent it all (mostly on paying off debts, loans, and bills), and 46 percent rolled it over into some other form of retirement plan mostly into IRAs. In the concluding section, the book also shows the monthly pension amounts of retirees by gender and age. ii

5 TABLE OF CONTENTS 1. Distribution of Workers by Age, Income, and Tenure, A. Age Distribution of Workers 1 Table 1.1 Age Distribution of All Workers Age 16 and Older Who Have a Job or Own a Business (Job/Business), Figure 1.1 Age Distribution of All Workers Age 16 and Older Who Have a Job/Business, B. Income Distribution of Workers 3 Table 1.2 Income Distribution of All Workers Age 16 and Older Who Have a Job/Business, Figure 1.2 Income Distribution of All Workers Age 16 and Older Who Have a Job/Business, C. Distribution of Workers by Tenure and Class 4 Figure 1.3 Percent Distribution of All Workers Age 16 nad Older by Age and Tenure, Table 1.3 Distribution of Workers by Current Primary Job, Retirement Plan Coverage by Socio-Demographic Characteristics, A. Retirement Plan Coverage by Age 6 Table 2.1 Retirement Plan Coverage of All Workers at Current Primary Job by Age, Table 2.2 Retirement Plan Coverage of All Persons at Current Job, Second Job, Previous Job(s), and IRAs by Age, Figure 2.1 Retirement Plan Coverage of All Workers at Current Job, During Career, and Any Coverage by Age, B. Retirement Plan Coverage by Gender, Race, and Tenure 9 Table 2.3 Retirement Plan Coverage by Age and Gender, Table 2.4 Retirement Plan Coverage by Age and Tenure, Table 2.5 Retirement Plan Coverage by Age and Race, Table 2.6 Retirement Plan Coverage by Marital Status and Race, C. Retirement Plan Coverage by Education and Income 11 Table 2.7 Retirement Plan Coverage by Socio-Demographic Characteristics, 2003 Figure 2.2 Retirement Plan Coverage at Current Job, During Career, and Any Coverage by Education, Figure 2.3 Retirement Plan Coverage at Current Job, During Career, Any Coverage, and IRAs by Income, iii

6 3. Types of Pension Plans, Chart 3.1 Types of Current Pension Plans, Table 3.1 Reasons for Not Participating in Employer-Provided Primary Pension Plans by Gender, A. DB and DC Plan Coverage by Socio-Demographic Characteristics 15 Table 3.2 Types of Pension Plans by Socio-Demographic Characteristics, B. DB and DC Plan Coverage by Age, Gender, and Race 17 Table 3.3 Types of Pension Plans by Age and Race, Table 3.4 Types of Pension Plans by Age and Gender, C. DB and DC Plan Coverage by Age, Income, and Education 18 Table 3.5 Types of Pension Plans by Age and Income, Table 3.6 Types of Pension Plans by Age and Education, Employer Sponsored (DC and 401(k)) Plans by Type Contributions, Table 4.1 Participants in Tax-Deferred Plans Through Payroll Deductions by Age, Table 4.2 DC Plan or 401(k)-Type Plans by Socio-Demographic Characteristics of Participants and Type of Contribution, A. Employer and Employee Contributions to All Tax-Deferred Plans 21 Table 4.3 Frequency Distribution in Tax-Deferred Plan Where Only Employer Contributes, Table 4.4 Frequency Distribution Total Value Accumulated in Tax Deferred Plans, Table 4.5 Frequency Distribution of Employee Contributions in All Tax-Deferred Plans (February-May, 2003) 22 Table 4.6 Frequency Distribution of Employee and Employer Contributions in All Tax-Deferred Plans (February-May Table 4.7 Percent Distribution of Employee Contributions to All Tax-Deferred Plans by Socio-Demographic Characteristics 23 4B. Employee s Choice of Investment in Tax-Deferred Plans 24 Figure 4.1 Frequency Distribution of Investment Receiving Largest Share from Current Employee Contributions by Type, IRAs by Socio-Demographic Characteristics, Table 5.1 IRA Ownership Among All Persons and All Workers by Age, Table 5.2 IRA Ownership Among All Workers by Age, Gender, and Race, Figure 5.1 IRA Ownership Among All Workers by Marital Status and Race, Figure 5.2 IRA Ownership Among All Workers by Age and Race, Figure 5.3 IRA Ownership Among All Workers by Age, Table 5.3 IRA Ownership and Current Pension Coverage by Socio-Demographic Characteristics, iv

7 6. Retirement Plan Coverage Among Women, A. Retirement Plan Coverage Among Women by Age, Marital Status, and Race 29 Figure 6.1 Retirement Plan Coverage Among All Working Women Age 16 and Older, Table 6.1 Retirement Plan Coverage Among All Working Women by Age and Race, Table 6.2 Retirement Plan Coverage Among All Working Women by Marital Status and Race, B. IRA Ownership Among Women by Age, Marital Status, and Race 31 Figure 6.2 IRA Ownership Among Working Women by Age and Race, Figure 6.3 IRA Ownership Among Working Women by Marital Status and Race, C. Types of Retirement Plans Among Women by Age, Marital Status, and Race 33 Table 6.3 Types of Retirement Plan Coverage Among Women by Age and Race, Table 6.4 Types of Retirement Plan Coverage Among Women by Marital Status and Race, Figure 6.4 Types of Retirement Plan Coverage by Gender and Race, Pension Plan Coverage from Previous Employment by Socio-Demographic Characteristics, Table 7.1 Pension Plan Coverage from Previous Employment by Socio-Demographic Characteristics, Chart 7.1 Flow Chart of Previous Pension Plan Coverage, Figure 7.1 Sources of Pension Plan Coverage, A. Pension Plan Coverage from Previous Employment by Age, Gender, Race, and Marital Status 37 Table 7.2 Pension Plan Coverage Among All Workers from Current and Previous Employment, 2003 Table 7.3 Pension Plan Coverage from Previous Employment by Age, Gender, and Race, Figure 7.2 Pension Plan Coverage from Previous Employment by Marital Status and Race, B. Lump-Sum Distributions (LSDs) from Previous Pension Plans 39 Chart 7.2 Flow Chart of LSDs and Rollovers, C. LSDs and Survivor s Benefits by Age, Gender, and Race 41 Table 7.4 LSD Recipients Among Those Who Have Pension Plan Coverage From Previous Employment 41 by Age, Gender, and Race, 2003 Figure 7.3 Percent Distribution of LSD Recipients by Amounts of LSD Received, Figure 7.4 Percent Distribution of LSD Recipients by Amounts of LSD Received and Gender, v

8 7D. LSDs and Their Uses 43 Table 7.5 Percent of All Recipients by LSD Amounts and Rollover Decisions, Table 7.6 All LSD Recipients and Recipients Who Rolloed Over by Age, Table 7.7 Multiple Use of Cash-Outs by LSD Recipients (Who Did Not Roll Over) by Most Important Category, Pensions and Retirement Lump-Sums, Chart 8.1 Flow Chart of Pensions and Retirement Lump-Sums, A. Amount of Monthly Pension 47 Table 8.1 Percent Distribution of Monthly Pension Amounts from Worker's Own Job by Age, Gender, and Race, Figure 8.1 Percent Distribution of Monthly Pension Amounts from Worker's Own Job by Gender, References 50 vi

9 1. Distribution of Workers by Age, Income, and Tenure, A. Age Distribution of Workers About million workers age 16 and older had a job or owned a business in This chart book divides workers in 2003 into five age cohorts by their birth year: post-boomers born from 1966 to 1987 (age 16 to 37), who constituted about 42 percent of all workers; younger boomers born in from 1956 to 1965 (age 38 to 47), who constituted about 26 percent; older boomers born from 1946 to 1955 (age 48 to 57), who constituted about 21 percent of all workers; pre-retirees born from 1939 to 1945 (age 58 to 64), who constituted 7 percent; and retirees born in 1938 or before (age 65 and older) who were still in the labor force and constituted about 4 percent of all workers (Figure 1.1). All of the data in this chart book are drawn from the Survey of Income and Program Participation (SIPP) (2001), Retirement Expectations and Pension Plan Coverage, Wave 7 (February-May 2003). Some of the definitions used in the book are drawn directly from the U.S. Bureau of the Census and the Labor Department s Bureau of Labor Statistics. According to the Census Bureau, a job is defined as an arrangement of regular work for pay. Jobs include self-employment at a business, professional practice, or farm. A business is defined as an activity that involves the use of machinery or equipment in which money has been invested, an activity requiring a place of work, or an activity that requires advertising. Payment may be in the form of profits or fees. The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in the glossary of the Bureau of Labor Statistics.[cite?] Persons are employed if they are 16 years and older in the civilian non-institutional population and during the reference week (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm; or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. 1

10 Table 1.1: Age Distribution of All Workers Age 16 and Older Who Have a Job/ Business, 2003 Number of Workers by Age Birth Year Workers (Millions) Percent Post-boomers: age Boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older 1933 or before All workers Figure 1.1: Age Distribution of All Workers Age 16 and Older Who Have a Job/Owned a Business, 2003 Younger boomers: age % Boomers: age % Older boomers: age % Pre-retirees: age % Retirees: age 65 and older 2% Post-boomers: age % 2

11 1B. Income Distribution of Workers In the SIPP sample of workers age 16 and older who had a job or owned a business, 71 percent earned less than $40,000 per year (at 2003 prices), while 29 percent earned more than $40,000. Table 1.2: Income Distribution of Workers Age 16 and Older Who Have a Job/ Owned a Business, 2003 Millions Percent Less than $20, $20,000 to $39, $40,000 to $59, $60,000 to $79, $80,000 to $99, $100,000 or more Total Percent Figure 1.2: Income Distribution of Workers Age 16 and Older Who Have a Job/Owned a Business, Less than $20, $20,000 to $39, $40,000 to $59, $60,000 to $79, $80,000 to $99,999 $100,000 or more 3

12 1C. Distribution of Workers by Tenure and Class About 48 percent of all workers had held their primary job for more than 5 years in As expected, this proportion rose with age (Figure 1.3). About 81 percent worked for private employers and 18 percent for some level of government (Table 1.3). (According to the U.S. Census Bureau definition, a primary job is one to which a worker devotes 35 hours or more per week.) Percent Figure 1.3: Percent Distribution of All Workers Age 16 and Older by Age and Tenure, Postboomers: age Younger boomers: age Job less than 5 yrs Older boomers: age Pre-retirees: age Retirees: age 65 and older Job 5 yrs. or more All W orkers Table 1.3: Distribution of Workers by Current Primary Job, 2003 (All Workers Age 16 and Older Who Have a Job/ Business) Employees Number (Millions) Percent Private Employees State and Local Federal Others Total* * 15.4 million (138.6 less 123.2) reported not having a current job/business 4

13 2. Retirement Plan Coverage by Socio-Demographic Characteristics, 2003 Retirement coverage is analyzed by using three definitions: Level 1: Current Pension Coverage retirement plan coverage at the current primary job; Level 2: Career Pension Coverage retirement plan coverage during the whole career including employer-sponsored pension plans (such as 401(k) plans) at a current primary job, a current secondary job, or any previous job; and Level 3: Any Coverage any retirement plan coverage from any source including employer-sponsored plans during a career (such as IRA or Keogh accounts). This category is the broadest definition of coverage. Table 2.1 presents the current coverage from one plan or multiple plans. Of million workers, about 81 million (58.4 percent) were offered pension plans, but only 63.4 million (45.7 percent) participated in them 49.6 million (35.8 percent) had one plan, and 13.8 million (almost 10 percent) had multiple plans. Table 2.2 presents the retirement coverage of all workers from various sources, including IRAs and Keoghs. Nearly 2 million workers had coverage from sources other than a primary employer, 40.9 million had coverage from a previous employer, and 32.7 million had IRAs. 5

14 2A. Retirement Plan Coverage by Age Table 2.1: Retirement Plan Coverage of All Workers at Current Primary Job by Age, 2003 (Percent of All Workers Age 16 and Older Who Have a Job/ Business) Workers Workers Offered Workers Participation in Plans at Current Job Workers by Age (W) Pension Plans One Plan Multiple Plans All Current Plans Millions Millions % of W Millions % of W Millions % of W Millions % of W Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers Table 2.2: Retirement Plan Coverage of All Persons from Current Job, Second Job, Previous Job(s), and IRAs by Age, 2003 Workers by Age Number of Persons Age 16 and Older Who Have Total Total Coverage from Various Sources (Millions) Number of Number of Plans from Plans from Persons Workers Current All Second Job/ Previous (Millions) (Millions) Primary Job IRAs Business Job(s)* Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All * These are not mutually exclusive categories. One may have coverage from more than one source. Those who have coverage from previous plans may or may not be in labor force, and hence persons and not workers is the unit of analysis. A detailed discussion on pension coverage from previous employment and IRAs is presented in the following chapters 6

15 Contd. Figure 2.1 (on page 8) presents workers with current, career, and any coverage. As can be seen below, of all workers age 16 and older, 45.7 percent had coverage from their current employer, and 54.4 percent had coverage from employer(s) during their career. If IRAs were included, retirement plan coverage from any source of all workers who were in labor force increased to 58.8 percent. Retirement plan coverage increased with age, but a little more than one-half of post-boomers (age 16-37), one-third of younger boomers (age 38-47), and a little less than 30 percent of older boomers and pre-retirees still lacked retirement coverage from any source. For older boomers, the rate of career pension coverage (66.1 percent) was more than 10 percentage points higher than the rate of pension coverage at a current primary job (56.1 percent), and any coverage from any source including IRAs (71.8 percent) was almost 16 percentage points higher. For pre-retirees, any coverage was almost 23 percentage points higher than their current coverage; and for retirees, any coverage was about 15 percentage points higher than career pension coverage and 38 percentage points higher than current pension coverage. One of the reasons for high rates of any coverage among retirees is because of higher rates of IRA ownership due to large rollovers from previous pension plans. Current pension coverage ( million, 45.7%) Career pension coverage + Other Plans + Previous Plans ( million, + IRAs 54.4%) Any coverage ( million, 58.8%) 7

16 Figure 2.1: Retirement Plan Coverage of All Workers Age 16 and Older at Current Job, During Career, and Any Coverage by Age, 2003 Percent of current workers Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older Current Pension Coverage Career Pension Coverage Any Coverage All Workers 8

17 2B. Retirement Plan Coverage by Age, Gender, Tenure, and Race There were statistically significant gender differences at all ages in retirement coverage (Table 2.3). Women in general had lower rates of coverage than men except in the case of current pension coverage where female pre-retirees and retirees had slightly higher rates of coverage. Workers who had jobs for five years or more had higher rates of current, career, and any coverage in all age groups (Table 2.4). Workers by Age Table 2.3: Retirement Plan Coverage by Age and Gender, 2003 (Percent of All Workers Age 16 and Older Who Have a Job/Business) Number of Workers (Millions) Current Pension Coverage (%) Career Pension Coverage (%) Men Any Coverage (%) Women Men Women Men Women Men Women Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers Career pension coverage includes current job, current second job and previous jobs. Any coverage include pension plans during career or IRAs or both. Table 2.4: Retirement Plan Coverage by Age and Tenure, 2003 ( Percent of All Workers Age 16 and Older Who Have a Job/Business) Number of Workers Current Pension Career Pension Any Coverage (%) (Millions) Coverage (%) Coverage (%) Workers by Age Job Less Job 5 Yrs. Job Less Job 5 Yrs. Job Less Job 5 Yrs. Job Less Job 5 Yrs. than 5 Yrs. or More than 5 Yrs. or More than 5 Yrs. or More than 5 Yrs. or More Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers

18 There were statistically significant differences in retirement coverage by race at all ages, as Table 2.5 shows. For all workers, any coverage from any source among whites was about 8 percentage points higher than among nonwhites. For older boomers the difference was even greater, about 14 percentage points. When divided by marital status (Table 2.6), the married, spouse present category had higher rates of current coverage than any other category with one exception nonwhite divorced persons had higher rates coverage than nonwhite persons who were married, spouse present Workers by Age Table 2.5: Retirement Plan Coverage by Age and Race, 2003 (Percent of All Workers Age 16 and Older Who Have a Job/Business) Number of Workers (Millions) Current Pension Coverage (%) Career Pension Coverage (%) White Nonwhite White Nonwhite White Nonwhite Any Coverage (%) Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers White Nonwhite Table 2.6: Retirement Plan Coverage by Marital Status and Race, 2003 (Percent of All Workers Age 16 and Older Who Have a Job/Business) Number of Workers Current Pension Career Pension Any Coverage (%) (Millions) Coverage (%) Coverage (%) Workers by Marital Status White Nonwhite White Nonwhite White Nonwhite White Nonwhite Married, spouse present Married, spouse absent Widowed Divorced Separated Never married All workers

19 2C. Retirement Plan Coverage by Education and Income Retirement plan coverage, however defined, increased with the level of education (Table 2.7). There was a 39 percentage point difference in pension coverage at one s current job between those with a less than a high school education and those with a college education. For pension coverage during a career or for any coverage, the difference between individuals with less than a high school education and a college education was more than 45 percentage points. Current pension coverage rates tripled when moving from annual incomes of less than $20,000 to incomes greater than $40,000. Any coverage from any source was 80 percent or higher above $40,000 in income. Workers Table 2.7: Retirement Plan Coverage by Socio-econoinc Characteristics, 2003 (Percent of All Workers Age 16 and Older Who Have a Job/Business) Number of Workers Millions Current Pension Coverage Millions Percent Millions Career Pension Coverage* Percent Millions Percent Millions Percent All workers By Education Less than high school High school Some college College By Income Less than $20, $20,000 to $39, $40,000 to $59, $60,000 to $79, $80,000 to $99, $100,000 or more * Career pension includes current job, current second job, and previous jobs. Any coverage includes pension plans during career or IRAs or both. IRAs Any Coverage 11

20 Figure 2.2: Retirement Plan Coverage at Current Job, During Career, and Any Coverage by Education, Current Pension Coverage Career Pension Coverage Any Coverage Less than high school High school Some college College Figure 2.3: Retirement Plan Coverage at Current Job, During Career, Any Coverage, and IRAs by Income, Percent Less than $20,000 $20,000 to $39,999 $40,000 to $59,999 $60,000 to $79,999 $80,000 to $99,999 $100,000 or more Current Pension Coverage Career Pension Coverage Any Coverage IRAs 12

21 3. Types of Pension Plans, 2003 Chart 3.1: Types of Current Pension Plans, 2003 DB: Defined benefit plans DC: Defined contribution plans CB: Cash balance plans Number of workers age 16 and older = million Number of workers age 16 and older who were offered employer-sponsored pension plans = million (58.4% of workers) Additional taxdeferred 401(k)- type plans offered ** = million DB-only plans = million (6.4 %) (a) (No DC or 401(k) plans) CB-only plans* = million (0.5%) (b) (No DC or 401(k) plans) DC/401(k)-only = million (19.7%) (c) (No DB or CB plans) DB and DC/401(k) plans = million (d); CB and DC/401(k) plans = million (e) All Dual coverage: million (19.1%) (f) Those who participated = million (5.1%) Note: Definition of all DC or 401(k)-type plans is drawn from Patrick Purcell, Participation in Retirement Plans: Findings from the Survey of Income and Program Participation. October 5, CRS, Library of Congress. Washington, DC. * By definition, all cash balance plans are defined benefit plans. ** In SIPP 2003 these plans were defined as tax-deferred plans E3TAXDEF (such as 401(k) plans) that were offered to workers with employers not offering primary pension plans or whose primary plan contributions were not tax-deferred. 13 Coverage: All DB plans (a+d) = million (22.8%) All CB plans (b+e) = million (3.2%) All DC/401(k) Plans (c+f) = million (38.8%) All current plans (a+b+c+f) = million (45.8%)

22 Even when employer-sponsored retirement plans were available, some workers did not qualify to participate for lack of hours worked or length of service. Some withdrew voluntarily. Table 3.1 presents all of the reasons for not participating in pension plans. The two most common reasons for not participating were not having enough hours, weeks, or months per year, and not having worked long enough. More women than men either did not qualify or did not participate in such plans. Table 3.1: Reasons for Not Participating in Employer-Provided Primary Pension Plans by Gender, 2003 Number of Cases Percent "Yes" by Reasons (n = million) Gender Total Women Men Women Men 1. No one in my type of job is allowed in the plan Do not work enough hours, weeks, months per year Have not worked long enough Started job too close to retirement Too Young Cannot afford to contribute Do not want to tie up money Employer doesn't contribute or contribute enough Do not plan to be in job long enough Do not need it Have an IRA or other pension coverage Spouse has pension plan Haven't thought about it Some other reason All The sum of all of the answers for various reasons does not add up to the total number of those who did not participate in pension plans (n = million) because there could be multiple reasons for not participating in plans. 14

23 3A. DB and DC Plan Coverage by Socio-Demographic Characteristics Table 3.2: Types of Pension Plans by Socio-Demographic Characteristics, 2003 (Percent of All Workers Age 16 and Older Who Have a Job/Business) Both DB/CB and All DB/CB All DC/ All DB or CB-Only DC or 401(k)-Only Characteristics All Workers DC/401(k) Plans Plans 401(k) Plans Millions Millions Percent Millions Percent Millions Percent Percent Percent Percent a b c=b/a d e=d/a f g=f/a (c+g) (d+g) (c+e+g) All workers Age Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older Gender Men Women Race White Nonwhite Firm Size and Tenure Employees: less than Employees: 100 and more Worked less than 5 years Worked 5 years or more Education Less than high school High school Some college College Marital Status Married Widowed/separated/divorced Never married

24 Table 3.2 contd. All Both DB/CB and All All DC/ DB or CB-Only DC or 401(k)-Only Characteristics Workers DC/401(k) Plans DB/CB 401(k) All Plans Millions Millions Percent Millions Percent Millions Percent Percent Percent Percent a b c=b/a d e=d/a f g=f/a (c+g) (d+g) (c+e+g) Income Less than $20, $20,000 to $39, $40,000 to $59, $60,000 to $79, $80,000 to $99, $100,000 or more Class of Workers* Private State and Local Federal Family Workers * million workers were either not employed or did not reveal their employers in the reference period of SIPP All DB plans are DB/CB-only plans plus (DB/CB and DC/401(k)) plans. All DC plans are DC/401(k)-only plans plus (DB/CB and DC/401(k)) plans. In Table 3.2 above DB plans and CB plans are combined into one category, and DC plans include all tax-deferred 401(k)- type plans. Of all age groups, older boomers (age 48-57) had the highest rates of DB or CB-only coverage. Because of the shift from DB plans to DC-type plans, rates of coverage for DC-only plans were higher than for DB-only plans. The rates of dual coverage (both DB/CB and DC/401(k) plans) were higher among (1) older boomers, (2) college graduates, (3) government employees, (4) those who worked for large firms (100 or more employees), (5) those who worked for 5 years or more, and (6) those who earned $40,000 or more annually. 16

25 3B. DB and DC Plan Coverage by Age, Gender, and Race Table 3.3 shows that whites had a slight edge over nonwhites in DC-only coverage, while nonwhites had a slight edge over whites in dual coverage (both DB/CB and DC or 401(k) in all age groups. Nonwhite retirees (age 65 and older) had higher dual coverage rates (a 9 percentage point difference) than white retirees. Results were mixed for DB-only coverage. Except for retirees, men in other age groups had higher rates of DC-only coverage and dual coverage than women. Table 3.3: Types of Pension Plans by Age and Race, 2003 (Percent of All White and Nonwhite Workers Age 16 and Older Who Have a Job/Business) Workers by Age Number of Workers (Millions) DB or CB-Only (%) White Nonwhite White Nonwhite DC or 401(k)-Only (%) White Nonwhite White Both DB/CB and DC/401(k) Plans (%) Nonwhite Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers Table 3.4: Types of Pension Plans by Age and Gender, 2003 (Percent of All Male and Female Workers Age 16 and Older Who Have a Job/Business) Number of Workers DC or 401(k)-only Both DB/CB and DB or CB only (%) (Millions) (%) DC/401(k) Plans (%) Workers by Age Men Women Men Women Men Women Men Women Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers

26 3C. DB and DC Plan Coverage by Age, Income, and Education For all age cohorts in Table 3.5, higher income groups (those with incomes of more than $40,000) had higher rates of coverage for DB-only, DC-only, and dual coverage plans. Similarly, Table 3.6 shows that in all age groups those with college education had higher rates of DC-only coverage and dual coverage than those with less than college education. Results by education were mixed in DB-only coverage. Table 3.5: Types of Pension Plans by Age and Income, 2003 (Percent of All High and Low Income Workers Age 16 and Older Who Have a Job/Business) Number of Workers DC or 401(k)-only Both DB/CB and DB or CB only (%) (millions) (%) DC/401(k) Plans (%) Workers by Age Income < Income Income < Income Income < Income Income < Income $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers Table 3.6: Types of Pension Plans by Age and Education, 2003 (Percent of All "Less than College" and "College" Workers Age 16 and Older Who Have a Job/Business) Number of Workers Both DB/CB and DB or CB only (%) DC or 401(k)-only (%) (Millions) DC/401(k) Plans (%) Workers by Marital Status Less than College College Less than College College Less than College College Less than College College Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers

27 4. Employer-Sponsored (DC and 401(k)) Plans by Type of Contribution, 2003 Of the 63.4 million workers who participated in employer-sponsored pension plans, 57.5 million (41.5 percent of workers) were offered DC or 401(k) plans, but only 53.9 million (39 percent) participated in them (Table 4.1). Older boomers had the highest rate of coverage followed by younger boomers and pre-retirees. For those who were age 65 and older, the rate of coverage was low because tax-deferred plans did not exist at the time of their pension coverage. Table 4.1: Participants in Tax-Deferred Plans Through Payroll Deductions by Age, 2003 (Percent of Workers Age 16 and Older Who Have a Job/Business) Number of Those Who Participate Those Who are Offered Those Who Contribute in Workers by Age Workers in All Current Plans DC or 401(k) Plans DC or 401(k) Plans Millions Millions Percent Millions Percent Millions Percent Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older All workers Most DC or 401(k)-type plans can be divided into three categories: a. Plans in which only employers contribute and employees either do not contribute or their contributions are not taxdeferred. b. Plans in which only employees contribute, and c. Plans in which employees contribute and employers match those contributions, either fully or partially. Table 4.2 highlights these plans by socio-demographic characteristics. Of 47.2 million (34 percent) of workers who contributed to DC or 401(k)-type plans, only 39.5 million (28.5 percent of all workers or 83.7 percent [calculated as /47.172] of those who contributed) received an employer match. Higher rates of coverage were observed in every type of plan if workers were employed by large firms, had tenure of 5 years or more, had more education, and earned $40,000 or more. 19

28 Table 4.2: DC or 401(k)-Type Plan by Socio-Demographic Characteristics of Participants and Type of Contribution, 2003 p y Characteristics Number of Workers Only Employers Contribute Only Employees Contribute Employees' Contributions Millions Millions Percent Millions Percent Millions Percent All workers Age, Gender and Race Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older Gender Male Female Race White Nonwhite Firm Size and Tenure Employees: Less than Employees: 100 and more Worked less than 5 years Worked 5 years or more Education Less than high school High school Some college College Marital Status Married Widowed/separated/divorced Never married Income Less than $20, $20,000 to $39, $40,000 to $59, $60,000 to $79, $80,000 to $99, $100,000 or more

29 4A. Employer and Employee Contributions to All Tax-Deferred Plans For all tax-deferred DC and 401(k)-type plans where only the employer contributed and the employee s contribution was either zero or not tax-deferred, the modal contribution by an employer was between $1,000 and $2,499 (Table 4.3). About 4.3 million workers had these plans as primary plans, and about 2 million had them as secondary plans. About 32 percent of the plans had an accumulated value between $5,000 and $9,999 in primary plans, and 44 percent had between $10,000 and $49,999 in secondary plans (Table 4.4). Of the 47.2 million workers who contributed to DC plans (Table 4.5), data on employee nonzero contributions in dollars were available for only 22.5 million workers (47.2 million less 24.6 million). The rest (24.6 million) contributed a fixed proportion of their salary. In terms of dollars, the tax-deferred contribution by employees varied from $1 to $10,000 or more. The modal nonzero employee contribution was between $2,000 and $4,999. As Table 4.6 shows, the modal salary contributed was between 5 and 10 percent for employees and 3 percent to 5 percent for employers. The 3 percent to 5 percent employer contribution was also the highest range contributed by employers (34 percent). As indicated before, not all tax-deferred plan holders received a match from their employers. Data were available for only 24.6 million workers. The employer match varied as follows. Employer s match depends: Percent of Cases Entirely on employee s contribution 61 percent Partially on employee s contribution 24 percent Not at all on employee s contribution 15 percent Total 100 percent Table 4.7 (on page 23) highlights the employees contributions by their socio-demographic characteristics. Note: There was one discrepancy in the SIPP data. The question on employer contributions referred to the worker s contribution in the last one year of the survey ( i.e., 2003), while the question regarding the employee s contribution referred to contributions in the reference period of SIPP (February-May 2003). It is possible that some workers who answered yes to the question, Do you contribute in tax-deferred plans? might have contributed outside of the reference period. 21

30 Table 4.3: Frequency Distribution of Employer Contributions Only, 2002 Contributions* Primary Plans Secondary Plans Millions Percent Millions Percent $1 to $ $101 to $ $501 to $1, $1,001 to $2, $2,500 to $5, More Than $5, Total * These contributions refer to the preceding year of the survey. Employee contributions are either zero or not tax-deferred. Table 4.4: Frequency Distribution of Total Value Accumulated in Tax Deferred Plans, 2003 Total Value* Primary Secondary Millions Percent Millions Percent $1 to $1, $1,000 thru $4, $5,000 thru $9, $10,00 thru $49, $50,000 or more Total * This value refers to plans where only employers contribute, employee contribution are either zero or not tax-deferred. Table 4.6: Frequency Distribution of Employee Contributions in All Tax-Deferred Plans (February - May 2003) Annual Employee Employees Contribution Millions Percent $ $1 to $ $500 to $ $1,000 to $1, $2,000 to $4, $5,000 to $9, More than $10, Total Data on nonzero dollar contributions were available only for 22.5 million workers. Table 4.6: Frequency Distribution of Employee and Employer Contributions in all Tax-Deferred Plans (February-May, 2003) Employee Contribution Employer Contribution % of Salary Millions Percent % of Salary Millions Percent Up to < than to to to to to to to or more or more Total

31 Table 4.7: Percent Distribution of Employee Contributions to All Tax-Deferred Plans by Socio-Demographic Characteristics, 2003 Characteristics $1 to $500 to $1,000 to $2,000 to $5,000 to $10,000 or $499 $999 $1,999 $4,999 $9,999 More Total All Workers Age Post-boomers: age Younger boomers: age Older boomers: age Pre-retirees: age Retirees: age 65 and older Education Less than high school High school Some college College Gender Men Women Race White Nonwhite Marital Status Married Divorced/separated/widow Never married