GAO

United States General Accounting Office

Report to Congressional Requesters

August 2000 PENSION PLANS

Characteristics of 

Persons in the Labor 

Force Without Pension 

Coverage

GAO/HEHS-00-131

Page 1 GAO/HEHS-00-131 Pension Plans 

Contents

Letter 3

Appendixes Appendix I: Scope and Methodology 24

Appendix II: Analysis of CPS Pension Coverage Rates and 

Lack-of-Coverage Factors 27

Appendix III: Summary of GAO’s Regression Models 30

Tables Table 1: Characteristics of Retired Persons Who Had Incomes Below

the Poverty Threshold and Lacked Pension Income, 1998 22

Table 2: Pension Status of the Wage and Salary Labor Force, 1988

and 1998 27

Table 3: Major Characteristics of Employees Not in a Pension 

Plan, 1998 28

Table 4: Characteristics of Retired Persons With No Pension Income 

of Their Own or From a Spouse, 1998 29

Table 5: Characteristics Associated With Persons in the Labor Force 

Who Lacked Pension Coverage, 1993 31

Table 6: Characteristics Associated With Persons in the Labor Force 

Who Chose Not to Participate in a Pension Plan of the 401(k)

Type, 1993 34

Figures Figure 1: The Proportion of the Employed Labor Force That Lacked 

Pension Coverage, 1988 and 1998 8

Figure 2: The Proportion of Employees With Selected Characteristics 

Who Did Not Have a Pension Plan, 1998 12

Figure 3: Percentage of Retired Persons With and Without Pension 

Income Who Had Selected Characteristics, 1998 20

Figure 4: Sources of Income for Retired Persons With and Without

Pension Income, 1998 21

Abbreviations

BLS Bureau of Labor Statistics

CPS Current Population Survey

SSI Supplemental Security Income
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United States General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-284459 Letr

August 22, 2000

The Honorable Major R. Owens

Ranking Minority Member

Subcommittee on Workforce Protections

Committee on Education and the Workforce

House of Representatives

The Honorable Robert Andrews

Ranking Minority Member

Subcommittee on Employer-Employee Relations

Committee on Education and the Workforce

House of Representatives

People who retire rely on income from pensions, Social Security, personal 

savings, and—to the extent they are willing and able to continue working—

wages and salaries.1

 The dramatic and continued growth in the size of the 

nation’s elderly population, and the resulting stress on Social Security’s 

finances, may portend greater reliance on other resources, such as 

pensions, for the economic well-being of people who retire. 

In recent decades, the Congress has enacted legislation to encourage 

pension sponsorship and participation. However, questions remain about 

the portion of the labor force not covered by pension plans and retired 

people who lack pension income. You asked us to provide information 

concerning (1) the proportion of the labor force without pension coverage 

and how that proportion has changed over the past decade, (2) the 

characteristics of workers in that labor force, and (3) the proportion and 

characteristics of retired people who lack pension income or pension 

assets.

To provide this information, we analyzed data from the Current Population 

Survey (CPS), conducted by the Bureau of the Census for the Bureau of 

Labor Statistics (BLS). For our analysis, we developed two regression 

1

While Social Security coverage is mandatory and nearly universal, it is not designed to 

provide adequate retirement income by itself. Pensions, personal savings, or earnings from 

work are usually needed to fill the gap between Social Security benefits and an adequate 

retirement income. 
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models based on CPS data that examine the association between various 

demographic and other characteristics and the lack of pension coverage. 

We also reviewed studies and talked to labor experts in government, the 

private sector, and academia to collect information on the reasons why 

certain characteristics are associated with the lack of coverage. We 

conducted our work between August 1999 and April 2000 in accordance 

with generally accepted government auditing standards. See appendix I for 

our scope and methodology.

Results in Brief About 53 percent of the employed labor force lacked a pension plan in 

1998, a decrease in those without coverage of 5 percentage points from 10 

years earlier. This improvement in pension coverage may stem from the 

economic expansion under way since 1991 that has encouraged firms to 

offer pensions as a part of their compensation packages and from an 

increased interest in pension coverage by persons in the labor force. About 

39 percent of the employed labor force lacked a pension plan because they 

worked for firms that did not sponsor a plan, while 14 percent lacked a plan 

because they were not eligible or chose not to participate in their firm’s 

plan.

A few characteristics describe the large majority of persons in the 

employed labor force who do not have a pension plan. In 1998, about 85 

percent of employees not in a firm’s plan had one or more of the following 

characteristics: They had relatively low income, were employed part time 

or part of the year, worked for a relatively small firm, or were relatively 

young. In that year, for example, 40 percent of all employees earned less 

than $20,000, and 81 percent of them lacked pension coverage. Similarly, 22 

percent of all employees worked for firms that had fewer than 25 

employees, and 82 percent of them lacked pension coverage. These 

characteristics appear to be associated with an employee’s desire for, or 

ability to take advantage of, pension coverage and a firm’s willingness or 

ability to provide coverage. For example, persons earning less than $20,000 

per year may have insufficient income to both pay current expenses and 

save for retirement. The per capita cost of sponsoring a pension plan may 

be higher for smaller firms than for larger firms. 

Our analysis indicates that in the past, many workers failed to earn a 

pension benefit during their work lives. In 1998, for example, about 48 

percent of persons who had retired lacked pension income or annuities. 

Retired people without pension income were more likely to be single, 

female, less educated, and Hispanic or not white. Additionally, retired 
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persons who lacked pension income were more likely to be poor. About 21 

percent of retired persons without pension income had incomes below the 

federal poverty threshold, compared with 3 percent with pension income. 

Background The probability that a person’s income will begin to decrease at a certain 

age fosters economic insecurity for many in the labor force.2

 Employee 

pension plans are a key component of the nation’s multifaceted retirement 

income security system—Social Security, pensions, personal savings, and 

to the extent retired persons are willing and able to continue working, 

wages and salaries—designed to address this issue. Participation in 

employee pension plans provides a structured mechanism for persons in 

the labor force to save for retirement. Income from such plans can be an 

important factor in determining whether people can maintain their 

preretirement standard of living after they retire.

Recognizing the importance of pension income to economic well-being, the 

federal government uses the income tax system to encourage firms to 

sponsor and employees to participate in such plans. At about $76 billion in 

2000, tax preferences for employer pension plans are the single largest tax 

expenditure, exceeding tax subsidies for home mortgages and health 

benefits.3

 These tax benefits seek to raise private saving for employee 

retirement and are structured to strike a balance between providing 

incentives for firms to start and maintain tax-qualified plans and ensuring 

that lower-income employees receive an equitable share of the subsidy.

2

BLS includes in the labor force all members of the civilian, noninstitutional population who 

are aged 16 or older and either working (employed) or actively looking for work 

(unemployed).

3

The Joint Committee on Taxation has also estimated that tax expenditures were $5 billion 

for Keogh plans for the self-employed and $12.2 billion for individual retirement plans. Joint 

Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2000-2004, 

JCS-13-99 (Washington, D.C.: Dec. 22, 1999).
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The Revenue Act of 1921 initiated the preferential tax treatment of pension 

plans, and the Revenue Act of 1926 and the Revenue Act of 1928 extended 

that preferential treatment to a broad range of pension plans. As broad as 

the tax benefit became in the 1920s, it initially had little influence on the 

development of pension plans. Pension coverage spread quickly during the 

1940s and 1950s, however, encouraged in part by the high marginal federal 

tax rates enacted to finance World War II, wage controls during and after 

the war that exempted pension benefits, and union efforts to negotiate 

pension benefits through collective bargaining. Pension coverage 

continued to increase during the 1960s and into the 1970s but stabilized and 

perhaps decreased slightly during the 1980s.4

Employee pension plans are customarily classified into two major 

categories: defined benefit plans and defined contribution plans. A defined 

benefit plan promises a retirement benefit amount that is usually 

determined by salary level and length of service. A defined contribution 

plan specifies contributions to be made, but the benefits depend on 

investment performance. 

In terms of coverage, defined benefit plans were the predominant type of 

employee retirement program for many years. In 1975, the percentage of 

pension plan participants who had a defined contribution plan as their 

primary plan was only 29 percent, but this increased to 60 percent by 1992.5

The Pension and Welfare Benefits Administration estimates that, in 1996, 83 

percent of all employees with pension coverage were in either a primary or 

supplemental defined contribution plan.

4

Department of Labor, Pension Coverage Issues for the ’90s (Washington, D.C.: 1994), and 

Pension and Health Benefits of American Workers (Washington, D.C.: May 1994).

5

401(k) Pension Plans: Many Take Advantage of Opportunity to Ensure Adequate 

Retirement Income (GAO/HEHS-96-176, Aug. 2, 1996).
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Much of the Labor 

Force Lacks a Pension 

Plan

About 53 percent of the employed labor force, 69 million persons, were 

without a pension plan in 1998, a decrease of 5 percentage points over 10 

years. (See fig. 1.) This change was the result of a growing proportion of the 

labor force being employed by firms with pension plans. Between 1988 and 

1998, the proportion of persons who were employed by firms that did not 

sponsor a plan decreased from 46 percent to 39 percent. However, that 

decrease was partially offset by a 2 percentage point increase in the 

number of persons who lacked a plan, either because they were not eligible 

or because they chose not to participate in their firm’s plan.6

 The source of 

our data on pension coverage over the past 10 years, CPS supplements 

conducted in March of each year, does not include the information needed 

to estimate how many of these persons chose not to participate. However, 

another survey, the CPS Contingent Work Supplement conducted in 

February 1999, indicates that about 28 percent of the labor force members 

who did not participate in their firm’s plan, or about 4 percent of the 

employed labor force, chose not to participate in that plan.7

6

While defined benefit plans generally enroll qualified employees automatically, defined 

contribution plans, such as 401(k) plans, are generally voluntary and employees must 

choose to participate in them.

7

Estimates based on the February and March CPS 1999 supplements are not strictly 

comparable. The February CPS supplement defined the labor force in terms of current 

employment, while the March CPS supplement defined it in terms of employment during the 

year preceding the survey. According to the Pension and Welfare Benefits Administration, 

for example, the March supplement elicits a higher number of part-year employees than the 

February supplement.
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Figure 1: The Proportion of the Employed Labor Force That Lacked Pension 

Coverage, 1988 and 1998

Note: The figure excludes persons in the labor force who were unemployed (about 1.7 million persons 

in both years). See appendix II. The figure and appendix exclude self-employed persons (about 14 

million in 1998) because the March CPS does not collect information on Keogh plans, a type of 

pension plan available to the self-employed.

Source: March 1989 and 1999 CPS.

0

10

20

30

40

50

60

Percentage

58

53

46

39

1988 1998

Firm Did Not Sponsor Plan

Employee Ineligible or Chose Not to Participate
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The decline between 1988 and 1998 in the proportion of the labor force 

without pension coverage may result from a number of factors. Factors 

that might affect a firm’s decision to sponsor a plan include the strength of 

the general economy and the relative priority that current and prospective 

employees place on pension coverage compared with wages and other 

forms of compensation. Firms might have been more likely to sponsor a 

plan in 1998 than in 1988, for example, because the economic expansion 

under way since 1991 had taken unemployment rates close to historical 

lows and a pension plan can serve as a management tool to attract and 

retain needed employees. Factors that might have increased employee 

interest in pension benefits include concerns about Social Security’s 

financial status and the increased proximity of the members of the babyboom generation to their retirement age. In January 2000, for example, 

analysts at the Federal Reserve reported that their surveys indicated that 

retirement-related reasons for saving have consistently increased in 

importance since 1989.8

 Among the possible reasons given for the 

increased focus on retirement savings were the ongoing discussions 

concerning the future of Social Security and the aging of the baby-boom 

generation. 

Despite the increase in coverage from sponsoring firms, about 14 percent 

of the employed labor force, 18.3 million persons, were not included in 

their firm’s pension plan, either because they did not meet the plan’s 

qualification standards or because they chose not to participate in it. 

Federal regulations and other laws permit firms to maintain tax-qualified 

plans that exclude certain groups of employees. For example, a firm may 

exclude employees with less than 1 year of job tenure from participating in 

its tax-qualified pension plan.9

8

Arthur B. Kennickell, Martha Starr-McCluer, and Brian J. Surette, “Recent Changes in U.S. 

Family Finances: Results from the 1998 Survey of Consumer Finances,” Federal Reserve 

Bulletin (Washington, D.C.: Jan. 2000).

9

The Internal Revenue Code and associated regulations establish rules that pension plans 

must meet to qualify for favorable tax treatment, including minimum length-of-service and 

age conditions for plan participation. Generally, plans must consider employees eligible if 

they have 1 year of service and are at least 21. A year of service is defined as a 12-month 

period in which the employee has at least 1,000 hours of service. 
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Our findings on the proportion of the labor force that lacks coverage are 

generally consistent with those of other survey data sets. For example, 

another BLS survey, a survey of public and private-sector establishments to 

determine the incidence and characteristics of employee benefit plans, also 

indicates that tens of millions of employees are not earning a pension 

benefit at any given time. The BLS establishment surveys do indicate that 

the proportion of employees who lack pension coverage may be smaller 

than is indicated by CPS surveys. On the basis of establishment surveys 

conducted between 1994 and 1997, BLS estimates that 42 percent of fulltime and part-time employees lack pension plans.10 BLS economists who 

analyzed the two surveys stated that it is difficult to explain why CPS 

coverage estimates tend to differ from those derived from establishment 

surveys. The economists indicated that coverage estimates based on 

establishment surveys may be more accurate because the CPS is a 

household survey and some respondents may lack knowledge about their 

own benefits coverage or the benefits coverage of the other household 

members for whom they responded. The BLS economists also stated, 

however, that establishment surveys do not include the detailed 

demographic and other information on employees who lack pension 

coverage found in the CPS, limiting the analysis of the characteristics of 

this population. 

The Characteristics of 

Persons in the Labor 

Force Who Lack 

Pension Coverage

About 85 percent of the persons in the labor force who worked and lacked 

pension coverage had one or more of four characteristics: They had 

relatively low income, did not work full time for the entire year, worked for 

a relatively small firm, or were relatively young. In turn, each of these 

factors is associated with the trade-off that current and prospective 

employees might be willing or able to make between pension benefits and 

other forms of compensation, such as wages and health benefits and the 

costs and benefits to firms of sponsoring a pension plan for their 

employees. For the most part, employees exhibited similar

10For a variety of reasons, pension coverage rates calculated on the basis of establishment 

surveys and the CPS are not directly comparable. For example, surveys of employer 

establishments exclude some employee groups that are included in CPS surveys. However, 

BLS economists found that after they adjusted for these differences, CPS estimates of 

participation in pension plans are considerably lower than estimates derived from 

establishment surveys. Diane E. Herz, Joseph R. Meisenheimer II, and Harriet G. Weinstein, 

“Health and Retirement Benefits: Data from Two BLS Surveys,” Monthly Labor Review (Mar. 

2000).
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characteristics,whether they were not covered because their firms did not 

sponsor a plan or they chose not to participate in their firm’s plan. 

Low-Income, Part-Time, 

Small-Business, and Young 

Employees Are More Likely 

to Lack Coverage

Employees with certain demographic or economic characteristics were 

more likely to lack pensions. Figure 2 shows that employees with the 

following characteristics were disproportionately more likely to lack 

pension coverage: employees with incomes of less than $20,000 (81 

percent), employees who worked part time or part of the year (79 percent), 

employees at firms with fewer than 25 employees (82 percent), and 

employees younger than 30 (76 percent).11 Many employees without 

pension plans had two or more of these characteristics. Together, for 

example, lower-income and small-firm employees accounted for 74 percent 

of persons who had no pension plan. Additionally, 82 percent of employees 

with incomes of less than $20,000 were part-time or part-year employees or 

younger than 30 or both. Research has provided a number of possible 

reasons for the association of these characteristics with the lack of pension 

coverage.

11We identified major characteristics associated with the lack of pension coverage using a 

model described in appendix III.
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Figure 2: The Proportion of Employees With Selected Characteristics Who Did Not 

Have a Pension Plan, 1998

Note: Reported income is individual income. Studies indicate that income may be underreported in the 

CPS. See appendix II for the estimated number of employees with each characteristic who lack 

pension coverage.

Source: March 1999 CPS.

Percentage

81 79

All Employees Younger

Than 30

0

20

40

60

80

100

Income Less

Than $20,000

Worked Part

Time or Part

of the Year

Firm Had 

Fewer Than

25 Employees

53

82

76
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Employees With Incomes of Less 

Than $20,000

While 34 percent of employees with incomes of $20,000 or more lacked 

pension coverage, 81 percent with lower incomes lacked coverage. Our 

model associated a 22 percentage point increase in the likelihood of being 

pensionless for employees with incomes of less than $20,000 compared 

with employees with incomes of more than $60,000. Income influences 

pension coverage in a number of ways. First, lower-income employees have 

constraints on the amount of money they can save because of their current 

consumption needs. If a person’s income barely covers a subsistence level 

of consumption, regardless of age, he or she might not be able to afford to 

save for retirement and might place a higher value on wages than on 

pension benefits. As indicated by data on family net worth, lower-income 

families (and hence workers) accumulate less savings. For example, in 

1998, families with incomes of $10,000 to $25,000 had a median net worth of 

$24,800, whereas families with incomes greater than $100,000 had a median 

net worth of $510,800.12

Persons with lower incomes also benefit less from the preferential 

treatment afforded to pension benefits with respect to income taxes than 

do persons with higher incomes. Lower-income employees typically have 

lower marginal tax rates and therefore gain less from deferring taxes on 

pension plan contributions and earnings than higher-income employees.13

Higher-income persons also may have lower marginal tax rates during 

retirement, when taxes would be due on pension plan distributions, than 

during their working years. Lower-income individuals, in contrast, are less 

likely to receive this benefit because their income is more likely to be taxed 

at the lowest rate while they are working and in retirement. This could 

further reduce the interest that lower-income workers have in pension plan 

coverage.

12Arthur B. Kennickell, Martha Starr-Mcluer, and Brian J. Surette, “Recent Changes in U.S. 

Family Finances: Results from the 1998 Survey of Consumer Finances,” Federal Reserve 

Bulletin (Jan. 2000).

13In 1999, the tax code had five marginal tax rates. The lowest rate was 15 percent for 

taxable income below $25,750 ($43,050 for married couples filing jointly), and the highest 

rate was 39.6 percent for taxable income higher than $283,150 for single persons and 

married couples.
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Beyond the obstacles to saving that lower-income persons face generally, 

some analysts contend that government programs also might affect the 

association of income and pension coverage to the extent that Social 

Security, Supplemental Security Income (SSI), and other programs may 

curtail the need for savings among lower-income persons.14 These analysts 

argue that Social Security replaces a higher percentage of the lower-income 

person’s preretirement earnings. This means that lower-income persons 

can rely on Social Security benefits to a greater extent to maintain their 

preretirement standard of living than can higher-income persons. 

Additionally, SSI and other needs-based programs have asset-based means 

tests to qualify for benefits. They conclude that needs-based requirements 

could discourage some lower-income workers from saving for retirement 

because the wealth accumulation would reduce their chances of qualifying 

for the programs.

Part-Time and Part-Year 

Employees

While 40 percent of persons who were employed full time and year-round 

lacked pension coverage, 79 percent of part-time and part-year employees 

lacked coverage. Our model indicated that the likelihood of lacking 

coverage is 20 percentage points higher for part-time workers than for fulltime workers. Persons working part time or part of the year are less likely 

to have pension coverage than full-time or year-round employees, partly 

because such employees may be less skilled or in more unstable jobs. In 

contrast, increased full-time employment may spur pension sponsorship 

because of firms’ desire to reduce the turnover of skilled employees. 

Pension coverage appears to reduce labor turnover, although this effect 

may be stronger at larger firms than smaller firms.15 The reduction in 

turnover reduces the firms’ labor costs by lowering training costs, and it 

enhances productivity by retaining skilled employees. Additionally, 

qualification standards for pension participation permit firms that sponsor 

a plan to retain favorable tax treatment, even if they exclude part-time and 

seasonal employees from participation. Such exclusions might be 

significant for the 4.6 million employees (3.5 percent of the labor force) 

who were involuntarily employed part time in 1998; that is, they said they 

would prefer to work full time but could not find full-time work.

14R. Glenn Hubbard, Jonathan Skinner, and Stephen P. Zeldes, “Precautionary Saving and 

Social Insurance,” Journal of Political Economy, Vol. 103, No. 2 (1995), pp. 360-99.

15William E. Even and David A. Macpherson, “Employer Size and Labor Turnover: The Role 

of Pensions,” Industrial and Labor Relations Review, Vol. 49, No. 4 (July 1996), pp. 707-28.
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Employees of Firms With Fewer 

Than 25 Employees 

While 41 percent of persons employed by firms with 100 or more 

employees lacked pension coverage, 82 percent of employees in firms with 

fewer than 25 employees lacked coverage. Our model associated a 14 

percentage point increase in the likelihood of lacking coverage for workers 

at firms with fewer than 25 employees compared with workers at firms 

with 250 or more employees. Several factors lead smaller firms to have 

lower rates of pension coverage than larger firms. In a survey of small 

employers, instability of revenues, employee preferences, and 

administrative burdens and costs were frequently cited as reasons why 

small firms did not offer pension plans.16 Revenue uncertainty prevents 

many small employers from sponsoring pension plans. About 19 percent of 

survey respondents said that revenues were too uncertain for the firm to 

commit to a pension plan. Additionally, the relationship between employee 

preferences and small-firm pension coverage is exhibited by the type of 

workers a small firm employs. Smaller firms that offer pension coverage 

tend to have employees with characteristics that are associated with an 

increased interest in pension coverage—that is, employees who have 

higher incomes, have more education, and stay with the firm longer. 

Administrative burdens and costs also can hinder plan sponsorship among 

small firms more than large firms because of economies of scale. 

Administrative costs can be spread out over more employees in a larger 

firm than in a smaller firm.

Employees Younger Than 30 While 42 percent of employees aged 30 to 59 lacked pension coverage, 76 

percent of employees younger than 30 lacked coverage. At early stages of 

their careers, some employees may prefer to not have pension coverage. 

Younger employees generally choose to spend their incomes on immediate 

needs such as paying child rearing expenses, paying college tuition, or 

financing a mortgage rather than saving for retirement.17 Also, younger 

16Paul Yakoboski, Pamela Ostuw, and Bill Pierron, The 1999 Small Employer Retirement 

Survey: Building a Better Mousetrap Is Not Enough, Employee Benefit Research Institute 

Issue Brief 212 (Washington, D.C.: Aug. 1999).

17The theoretical basis for such preferences is found in a life-cycle savings and consumption 

model. According to this model, expenditures typically exceed earned income during the 

early part of a person’s working years because of more immediate consumption needs. This 

tends to discourage saving for retirement. Later in life, consumption needs are more likely 

to be less than earned income, and households can pay off past debts and save for 

retirement. At retirement, income decreases, consumption needs again exceed earned 

income, and households use their savings. For a full description of the life-cycle savings and 

consumption model, see Olivia S. Mitchell and James F. Moore, Retirement Wealth 

Accumulation and Decumulation: New Developments and Outstanding Opportunities 

(Philadelphia: The Pension Research Council, Apr. 1997).
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employees may simply not feel the need to plan for retirement at the early 

stages of their careers. As retirement nears, however, employees become 

more concerned about planning for it and may increasingly select jobs with 

pension coverage. Finally, employers are allowed to exclude employees 

from participating in a plan during their first year of employment. This 

would affect younger workers more than older workers.

Other Characteristics of 

Employees Not in a Pension 

Plan

Our analysis also found several other characteristics that are associated 

with a lack of pension coverage. Education is correlated with income and 

the type of job a person acquires. Having a relatively high educational level 

makes a person more likely to work for a firm that offers coverage, and 

vice versa.18 Job tenure also influences pension coverage; employees in 

high-turnover industries may have less desire for coverage since they may 

be unable to meet vesting requirements. In addition, employees in highturnover industries may prefer higher wages to pension benefits because 

their job situation is more tenuous. Some industries and occupations lack 

pension coverage to a greater extent than others. According to our analysis, 

for example, in 1998, 58 percent of private-sector employees lacked 

pension coverage, compared with 27 percent of public-sector employees. 

Public-sector employees may have higher coverage rates than privatesector employees because, among other reasons, many public-sector 

employees have traditionally been excluded from Social Security coverage 

and more public-sector employees are unionized.19 The collective action of 

union members can push employers to offer pensions if the members of the 

union want the coverage more than individuals in a nonunion setting.20

18William E. Even and David A. Macpherson, “The Changing Distribution of Pension 

Coverage,” Industrial Relations, Vol. 39, No. 2 (Apr. 2000), pp. 199-227.

19Olivia S. Mitchell and Anna M. Rappaport, “Innovations and Trends in Pension Plan 

Coverage, Type, and Design,” The Future of Pensions in the United States (Philadelphia: The 

Pension Research Council, 1993).

20Richard B. Freeman and James L. Medoff, What Do Unions Do? (New York: Basic Books, 

1984).
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Race and ethnicity are also associated with a lack of pension coverage, 

although this relationship is not well understood. According to our 

analysis, blacks and non-Hispanic whites appear equally likely to lack 

pension coverage, whereas Hispanics and Asians are more likely than nonHispanic whites to lack pension coverage. There are a limited number of 

studies to explain these gaps in coverage, and more research is needed.21 In 

addition, our analysis found associations between pension coverage and 

industry of employment, occupation, marital status, and the spouse’s 

pension coverage status. However, as with race and ethnicity, more 

research is needed to explain these differences.

The Characteristics of 

Employees Who Choose Not 

to Participate in a Plan

About 4 percent of employees were offered coverage but chose not to 

participate in a plan. We analyzed employees who were offered defined 

contribution plan coverage and had no supplemental defined benefit 

coverage to find the characteristics that were associated with their 

choosing not to participate.22 Our analysis showed that employees who 

were more likely to choose not to participate in defined contribution plans, 

such as 401(k) plans, have some of the same characteristics as persons in 

the workforce who lacked pension coverage. For example, employees who 

chose not to participate in their firm’s pension plans were more likely to 

have relatively low income, be relatively young, and have less than a year of 

job tenure.23

21William E. Even and David A. Macpherson, “Racial and Ethnic Differences in Pension 

Coverage and Benefit Levels,” working paper. Hypotheses for the differences in coverage 

rates among racial and ethnic groups include differences in life expectancy and family 

structure.

22Annual March and February versions of the CPS do not provide comprehensive 

information on employees who have the choice to be in a plan but choose not to participate 

in it. For example, the February 1999 CPS lacks data on firm size. The most current data 

source with such information is the April 1993 CPS Survey of Employee Benefits.

23See appendix III for the complete results of our analysis.
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Our analysis showed that unlike the persons with characteristics described 

above, employees of larger firms (firms with 100 or more employees) 

compared with employees of small firms were 11 percent more likely to 

choose not to participate in their firms’ defined contribution plans. A study 

by Fidelity Investments of more than 5,400 defined contribution pension 

plans covering 5.2 million participants and using 1998 data also found that 

larger defined contribution plans have higher nonparticipation rates than 

smaller plans.24 The study concluded that the work environment in small 

companies might allow more opportunity for employees to interact with 

and be motivated by management, which could lead to greater 

participation in a firm’s pension plan. Also, larger companies are more 

likely to have other retirement programs, such as defined benefit plans, 

that automatically cover eligible employees. Employees who are 

automatically enrolled in a defined benefit plan might be less likely to 

choose to participate in a supplementary 401(k) plan. 

Our analysis also showed that employees were 12 percent more likely to 

choose not to participate in their firm’s defined contribution plan when the 

firm did not provide matching contributions to the plan. The Fidelity 

Investments study had similar results. It reported that a company match 

has a very positive effect on participation rates, regardless of a plan’s size. 

In large plans, for example, a 1.5 percent effective match increases 

participation by nearly 19 percentage points.

24Fidelity Investments, Building Futures: How American Companies Are Helping Their 

Employees Retire. (n.p.: n.d.).
B-284459

Page 19 GAO/HEHS-00-131 Pension Plans 

Many Retired Persons 

Lack Pension Income 

While it is not possible to predict how many persons currently in the labor 

force will ultimately earn a pension benefit, our analysis indicates that in 

the past, many workers failed to earn such a benefit.25 In 1998, for example, 

48 percent of retired persons (17.6 million of 36.6 million) reported that 

they had no pension income of their own or from a spouse.26

Some of the characteristics we identified as associated with employees 

who lacked pension coverage also applied to retired persons who lacked 

pension income: They were more likely to lack high school diplomas, be 

Hispanic or nonwhite, and have incomes below the federal poverty 

threshold. (See fig. 3.) For example, 21 percent of retired persons without 

pension income had incomes below the federal poverty threshold, 

compared with 3 percent with pension income. In addition, we found that 

women and single retired persons were more likely to lack pension income. 

For example, 51 percent of retired persons without pension income were 

single compared with 32 percent with pension income. 

25Persons who are retired now had work lives that spanned the past three or four decades, 

which included the passage of the Employee Retirement Income Security Act of 1974, the 

rise of 401(k) plans, and other major pension developments. Thus, we cannot infer from a 

profile of current retirees what the experience will be for current workers who are still 

many years from retirement.

26Using March CPS data, we categorized as “retired” persons aged 65 or older not working 

full time and persons younger than 65 who gave “retired” as the reason for not working 

during all or part of the year. We defined pension income as including regular payments 

from annuities, individual retirement accounts, Keogh or 401(k) accounts, veterans’ 

pensions, or survivor benefits. Annuities are insurance products that provide a stream of 

payments for a preestablished period of time in return for a premium payment.
B-284459

Page 20 GAO/HEHS-00-131 Pension Plans 

Figure 3: Percentage of Retired Persons With and Without Pension Income Who Had 

Selected Characteristics, 1998

Note: The number of persons with pension income = 19 million. The number of persons without 

pension income = 17.6 million. See appendix II for the estimated number of retirees with each 

characteristic who lacked pension income.

Source: March 1999 CPS. 

Retired persons without pension income were also less likely than retired 

persons with pension income to have income from other sources, except 

for SSI and other public assistance programs. (See fig. 4.) For example, 

persons without pension income were less likely to have income from 

assets (51 percent) than those with pension income (78 percent). However, 

those without pension income were more likely to rely on public assistance 

programs than those with pension income. 

Percentage

64

51

Single Income Below the

Federal Poverty

Threshold

0

10

20

30

40

50

60

70

Women No High School

Diploma

Hispanic or

Not White

32

53

40

21 23

11

21

3

Without Pension Income

With Pension Income
B-284459

Page 21 GAO/HEHS-00-131 Pension Plans 

Figure 4: Sources of Income for Retired Persons With and Without Pension Income, 

1998

Source: March 1999 CPS.

Although most of the 17.6 million retired persons who lacked pension 

income did not have incomes below the federal poverty threshold, about 21 

percent of them (3.6 million) had incomes below the poverty threshold. The 

characteristics associated with the lack of pension income shown in figure 

3 were also highly associated with retired persons who had incomes below 

the poverty threshold and who lacked pension income. For example, 71 

percent of retired persons who had incomes below the poverty threshold 

and lacked pension income were single. Similarly, 69 percent were women, 

and 55 percent lacked a high school diploma. (See table 1.)

Percentage

Retired Persons With Pension Income

0

10

20

30

40

50

60

70

80

90

100

21

51

85

23

1

Social Security Income

Asset Income (Interest, Dividends, Rent)

Earnings From Part-Time Employment or a Spouse Still Working

Income From SSI or Other Public Assistance

8

87

78

Retired Persons With No Pension Income
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Page 22 GAO/HEHS-00-131 Pension Plans 

Table 1: Characteristics of Retired Persons Who Had Incomes Below the Poverty 

Threshold and Lacked Pension Income, 1998

Source: March 1999 CPS.

Concluding 

Observations

In recent decades, federal efforts to expand private pension coverage have 

concentrated on providing tax incentives for employers to sponsor and 

employees to participate in pension plans. These efforts have been 

relatively successful in fostering pension coverage among moderateincome and high-income workers. Almost two-thirds of all workers with 

incomes greater than $20,000 a year had pension coverage. Despite these 

longstanding tax benefits and a sustained economic expansion featuring 

historically low unemployment levels, more than half of the labor force in 

1998—71 million workers—continued to have no pension coverage. 

Further, this lack of pension coverage is concentrated in certain segments 

of the labor force. More than 80 percent of lower-income workers—those 

earning less than $20,000 per year—continue to lack pension coverage. 

We note that our analysis indicates only the extent to which labor force 

participants do not have pension coverage at a point in time. Some of the 

“pensionless” workers we identified will likely obtain a pension plan later 

in their work careers. However, we also found that a sizable proportion of 

current retired persons (48 percent) do not have pension income and that 

they are more likely to have incomes below the federal poverty threshold 

than those who receive pension income. This suggests that incentives or 

interventions that rely on tax preferences to encourage voluntary pension 

sponsorship and participation have not enabled certain segments of the 

labor force, such as lower-income and part-time employees, to receive 

pension benefits at retirement.

Characteristic

Percent

(N = 3.6 million)

Single 71%

Women 69

No high school diploma 55

Hispanic or not white 37
B-284459

Page 23 GAO/HEHS-00-131 Pension Plans 

Agency Comments We provided Labor the opportunity to comment on the report. Labor 

provided us with technical comments, which we incorporated where 

appropriate.

We are sending copies of this report to the Honorable Alexis M. Herman, 

Secretary of Labor, and the appropriate congressional committees. Copies 

will also be made available to others on request. Please call me at (202) 512-

5491 or Charles A. Jeszeck at (202) 512-7036 if you or your staff have any 

questions. Other major contributors to the report include Andrew 

Davenport, Jeffrey S. Petersen, Donald J. Porteous, and John M. Schaefer.

Barbara D. Bovbjerg

Associate Director, Education, Workforce, and

Income Security Issues
Page 24 GAO/HEHS-00-131 Pension Plans 

Appendix I

Scope and Methodology ApApenednxidexiIs

To obtain information on the characteristics of persons in the labor force 

who do not have pension plans and the extent to which they are not 

covered, we interviewed pension experts and reviewed relevant studies. 

Using information from interviews and other studies, we identified the 

demographic and other characteristics associated with pension coverage 

and analyzed survey data. We used a logistic regression model to assess the 

influence those characteristics appeared to have on pension coverage. We 

also used survey data to provide current data for the relevant 

characteristics. We used information from the studies that we reviewed and 

the pension experts whom we interviewed to provide a context for the 

relevant characteristics. Similarly, we reviewed studies and analyzed 

survey data to examine the extent to which retired persons do not receive 

pension income and their characteristics.

Survey Data We used survey data from the Current Population Survey (CPS) because of 

its large sample size, its inclusion of detailed information on the economic 

and demographic characteristics of labor force participants, and the 

timeliness of its data and because its collection frequency allows the 

opportunity to show trends over time. The annual March CPS supplement 

is the official source of income and poverty estimates for the United States 

and has been a mainstay of income measurement in the United States since 

it began in 1947. The March supplement includes household economic, 

demographic, and employment data for the previous year. It contains labor 

force data on 101,000 persons aged 15 and older. The large sample size 

makes it possible to estimate rates of pension coverage among categories 

of workers that are based on various demographic characteristics with 

small sampling errors. The sampling errors for the estimated percentages 

used in this report are less than plus or minus 1 percentage point at the 95 

percent confidence level. We used annual March CPS supplements from 

1989 and 1999 to provide trend data concerning pension coverage. These 

supplements provide information concerning pension plan sponsorship 

and participation for jobs held in the year preceding the survey, although 

they do not contain information as to why persons were not in their firm’s 

plan—that is, whether they were ineligible or chose to not participate.

For pension-related information not available in the March supplement, we 

used other CPS supplements. We used the February 1999 CPS Contingent 

Work Supplement for information about whether employees were ineligible 

or chose not to participate in their current firm’s pension plan. The most 

recent CPS supplement specifically designed to provide comprehensive 

information concerning pension coverage and participation was the April 
Appendix I

Scope and Methodology

Page 25 GAO/HEHS-00-131 Pension Plans 

1993 Survey of Employee Benefits, which we used for our logistic 

regression models. Comprehensive pension coverage and participation 

information was collected in the 1996 Survey of Income and Program 

Participation; however, that information has not yet been processed and 

released for public use.

Although widely used and a rich source of detailed data, CPS and other 

surveys that are based on self-reported data are subject to several sources 

of nonsampling error, including inability to get information about all 

sample cases; difficulties of definition; differences in the interpretation of 

questions; respondents’ inability or unwillingness to provide correct 

information; and errors made in collecting, recording, coding, and 

processing data.

These nonsampling errors can influence the accuracy of information 

presented in the report, although the magnitude of their effect is not 

known. For March 1999, about 8 percent of persons in the sample did not 

respond to the basic survey, which the Bureau of the Census adjusts for by 

using weighting techniques. Additionally, some respondents do not provide 

answers to all the questions in the survey, and the Bureau imputes 

responses based on data from respondents with similar demographic 

characteristics. For example, about 14 percent of the data on pension 

inclusion and about 26 percent of the data on earnings are imputed. These 

adjustments may not fully correct for missing or incorrectly reported data. 

For example, much previous research has shown that all sources of income 

have historically been underreported in the CPS.1

 Furthermore, when 

responses to pension questions were provided, more than 20 percent of the 

respondents were persons in the household other than the employee or the 

employee’s spouse, and Bureau of Labor Statistics (BLS) researchers 

question the ability of these persons to consistently provide accurate 

information concerning the employee’s pension coverage.

In addition, comparing data between supplements is difficult because of 

differences in the wording of questions, the time periods the questions 

cover, and the persons of whom the questions are asked. For example, the 

March supplement asks pension questions concerning employment in the 

past year, while the February supplement asks questions concerning 

current employment.

1

Patrick J. Purcell, Pension Issues: Lump-Sum Distributions and Retirement Income 

Security (Washington, D.C.: Congressional Research Service, Mar. 14, 2000).
Appendix I

Scope and Methodology

Page 26 GAO/HEHS-00-131 Pension Plans 

Logistic Regression 

Models

We developed two models to examine the strength of the association 

between various economic and work-related characteristics and the lack of 

pension coverage or participation. In the first model, the pension coverage 

model, we examined persons aged 21 to 54 who were not self-employed to 

assess the factors that contribute to their lack of pension coverage. In the 

second model, the pension choice model, we examined persons aged 21 to 

54 who were not self-employed who were offered defined contribution 

pension coverage and assessed the factors that influence whether they 

choose to participate in a plan. We used the April 1993 CPS Survey of 

Employee Benefits to test the characteristics that appear to influence 

pension coverage and choice. The models and their results are described in 

appendix III.
Page 27 GAO/HEHS-00-131 Pension Plans 

Appendix II

Analysis of CPS Pension Coverage Rates and 

Lack-of-Coverage Factors ApendxiI

Table 2 shows that excluding self-employed persons, almost 133 million 

persons reported that they worked or looked for work at some time during 

1998.1

 About 69 million persons in the labor force were employed but 

lacked pension coverage because their employers did not sponsor a plan or 

they were not eligible for or chose not to participate in their employer’s 

plan. An additional 1.7 million persons lacked pension coverage because 

they were unemployed throughout the year.

Table 2: Pension Status of the Wage and Salary Labor Force, 1988 and 1998

Note: Numbers are millions of persons.

Source: March 1989 and 1999 CPS.

Table 3 shows that a majority of the 69 million employees who lacked 

pension coverage had specific characteristics. For example, employees 

with incomes of less than $20,000 made up 40 percent of the employed 

labor force but 61 percent of those who lacked pension coverage. 

Similarly, persons who worked part time or for part of a year made up 34 

percent of the employed labor force but 51 percent of those who lacked 

coverage.

1

This figure excludes 14 million self-employed persons because the March CPS does not 

include information on Keogh plans, a type of pension plan available to the self-employed.

Status 1988 1998

Employed labor force

 In a plan 48.6 61.5

 Not in a plan

 Firm did not sponsor a plan 54.3 51.1

 Firm sponsored a plan, but person was not

 eligible or chose not to participate in it 14.1 18.3

Total employed and not in a plan 68.4 69.4

Total employed labor force 117.0 130.9

Unemployed–did not work but looked for work some time 

during the year 1.7 1.7

Total labor force 118.7 132.6
Appendix II

Analysis of CPS Pension Coverage Rates and 

Lack-of-Coverage Factors

Page 28 GAO/HEHS-00-131 Pension Plans 

Table 3: Major Characteristics of Employees Not in a Pension Plan, 1998 

Note: Number of persons = millions. Numbers may not add because of rounding.

a

Excludes 1.7 million persons in the labor force who were unemployed.

Source: March 1999 CPS.

At retirement, persons who lack pension income were more likely to have 

incomes below the federal poverty threshold or to be single, women, 

Hispanic or not white or to have less education compared with those with 

pension income. (See table 4.) For example, 21 percent of retired persons 

without pension income had incomes below the federal poverty threshold 

compared with 3 percent with pension income. Similarly, 23 percent 

without pension income were Hispanic or not white compared with 11 

percent with pension income. 

Employed labor forcea Not in a pension plan

Characteristic Number Percent Number Percent

Total individual income

Less than $20,000 52.3 40% 42.5 61%

$20,000 or more 78.5 60 26.9 39

Total 130.9 100% 69.4 100%

Work schedule

Employed part time or part of the 

year 44.9 34% 35.4 51%

Employed full time and all year 85.9 66 34.1 49

Total 130.9 100% 69.4 100%

Firm size

Fewer than 25 employees 29.2 22% 23.9 34%

25−99 employees 17.8 14 11.2 16

100 or more employees 83.9 64 34.3 49

Total 130.9 100% 69.4 100%

Age in years

16−29 38.7 30% 29.5 42%

30−59 83.7 64 35.2 51

60 or older 8.5 6 4.8 7

Total 130.9 100% 69.4 100%
Appendix II

Analysis of CPS Pension Coverage Rates and 

Lack-of-Coverage Factors

Page 29 GAO/HEHS-00-131 Pension Plans 

Table 4: Characteristics of Retired Persons With No Pension Income of Their Own or 

From a Spouse, 1998

Note: Number of persons = millions. Numbers may not add because of rounding.

a

Total income includes income of the spouse and other family members who lived with the retired 

person.

Source: March 1999 CPS.

Pension income No pension income

Characteristic

Total

number Number Percent Number Percent

Total incomea

Below poverty threshold 4.2 0.5 3% 3.6 21%

Above poverty threshold 32.4 18.4 97 13.9 79

Total 36.6 19.0 100% 17.6 100%

Marital status

Single 15.1 6.0 32% 9.0 51%

Married 21.5 12.9 68 8.5 49

Total 36.6 19.0 100% 17.6 100%

Gender

Male 15.2 8.9 47% 6.3 36%

Female 21.3 10.0 53 11.3 64

Total 36.6 19.0 100% 17.6 100%

Race or ethnicity

White 30.5 16.9 89% 13.6 77%

Hispanic or not white 6.1 2.1 11 4.0 23

Total 36.6 19.0 100% 17.6 100%

Education

No high school diploma 11.1 4.0 21% 7.1 40%

High school diploma or 

higher

25.5 15.0 79 10.5 60

Total 36.6 19.0 100% 17.6 100%
Page 30 GAO/HEHS-00-131 Pension Plans 

Appendix III

Summary of GAO’s Regression Models ApendxiI

The purpose of the logistic regression models is to find associations 

between pension coverage and the characteristics of employees and the 

firms for which they work. The results of the regressions should not be 

interpreted as direct causation between the lack of pension coverage and 

the variables in a model. For the pension coverage model, we defined the 

outcome variable as whether or not persons in the labor force were 

covered by an employee pension plan. Closely following an analytical 

model presented by pension experts, we categorized the predictor 

variables as employee- or job-specific.1

 Employee-specific variables assess 

the employees’ demand for a pension, attempting to capture their desire to 

have pension coverage or to select themselves into jobs that have pension 

coverage. For example, as a person’s total income rises, he or she may be 

more likely to demand pension coverage because of the tax advantages that 

pensions offer relative to wages and other forms of compensation. Jobspecific variables attempt to assess the firm’s willingness to supply a 

pension. For example, small firms lack the economies of scale (as the 

number of employees increases, cost per employee decreases) to start and 

administer pension plans. Therefore, small firms may be less likely to 

provide coverage. 

Table 5 presents the results of our pension coverage model. The model 

indicates that the statistically significant employee characteristics 

associated with the lack of coverage were income, part-time status, age, 

tenure, race, education, firm size, union status, the spouse’s pension 

coverage, the spouse’s employment status, industry of employment, and 

type of occupation.2

 The amount of the difference in pension coverage that 

is attributable to the difference between the “reference” variable and the 

other variables in the category is shown in the marginal effect column. 

Marginal effect shows the likelihood of not having pension coverage if an 

individual moved from the reference variable to another variable within the 

category. For example, the table shows that the marginal effect of being a 

part-time worker is 20.1 percentage points. Evaluated at the mean 

characteristic across all workers in the sample, the results suggest that if a 

full-time employee switched to a part-time job, the likelihood of this 

employee lacking a pension would increase by 20.1 percentage points, if all

1

William E. Even and David A. Macpherson, “The Gender Gap in Pension and Wages,” 

Review of Economics and Statistics, Vol. 72, No. 2 (May 1990), pp. 259-62.

2

Variables were considered statistically significant at the .05 level.
Appendix III

Summary of GAO’s Regression Models

Page 31 GAO/HEHS-00-131 Pension Plans 

the person’s other characteristics that were included in the model held 

constant.

Table 5: Characteristics Associated With Persons in the Labor Force Who Lacked 

Pension Coverage, 1993

Characteristic

Percentage

without

coverage

Logit

estimate

Standard

error

Marginal

effect

Income

Less than $20,000 49.9% 1.389 0.131 22.2%**

$20,000 to $39,999 20.8 0.592 0.123 13.6**

$40,000 to $59,999 11.0 0.221 0.131 5.5

More than $59,999 9.4 Referencea

Work status

Part-time 55.3 1.040 0.083 20.1**

Full-time 22.8 Referencea

Age in years

21-29 35.4 0.146 0.072 3.6 *

30-39 26.4 0.019 0.062 0.5

40-54 33.5 Referencea

Tenure

1 year or less 51.3 0.681 0.086 15.2**

More than 1 year 24.0 Referencea

Race or ethnicity

Black 23.6 0.148 0.099 3.7

Hispanic 42.1 0.445 0.100 10.6**

Asian 29.6 0.380 0.177 9.2 *

Other 28.5 0.273 0.347 6.7

White 25.0 Referencea

Gender

Male 24.7 0.063 0.066 1.6

Female 27.9 Referencea

Marital status and spouse’s work 

status and coverage

Married, spouse works but has no 

coverage 32.7 0.219 0.076 5.4**

Married, spouse does not work 25.1 0.010 0.083 0.2
Appendix III

Summary of GAO’s Regression Models

Page 32 GAO/HEHS-00-131 Pension Plans 

Married, spouse works and has 

coverage 20.4 -0.243 0.067 -6.0**

Single 29.7 Referencea

Education

No high school diploma 52.3 0.826 0.120 17.5**

High school diploma 31.4 0.441 0.086 10.5**

Some college 24.7 0.163 0.084 4.0

College diploma 14.4 Referencea

Firm size

Fewer than 25 employees 75.8 2.950 0.073 13.9**

25-99 employees 45.2 1.927 0.072 21.4**

100-249 employees 22.5 0.904 0.093 18.5**

250 employees or more 10.3 Referencea

Union status

Not a union member 31.6 0.995 0.088 19.6**

Union member 7.4 Referencea

Industry

Agriculture, forestry, and fisheries 69.3 0.796 0.307 17.1**

Mining 21.0 0.808 0.295 17.2**

Construction 46.6 0.711 0.143 15.7**

Manufacturing, nondurable goods 19.7 0.283 0.127 6.9 *

Transportation 22.5 0.811 0.154 17.3**

Communications 12.2 0.586 0.253 13.5 *

Utilities 4.1 -1.173 0.360 -21.2**

Wholesale trade 29.7 0.204 0.147 5.1

Retail trade 47.1 0.914 0.121 18.7**

Finance, insurance, and real estate 17.0 -0.036 0.145 -0.9

Business and repair 46.1 0.963 0.142 19.3**

Personal services, including private 

household 73.0 1.527 0.199 22.4**

Entertainment 44.3 0.917 0.237 18.7**

Hospital 4.9 -0.705 0.210 -15.6**

Medical, except hospital 38.5 0.093 0.154 2.3

Education 13.3 0.179 0.148 4.4

Social services 45.1 0.821 0.190 17.4**

Other professional 31.3 0.325 0.153 7.9 *

(Continued From Previous Page)

Characteristic

Percentage

without

coverage

Logit

estimate

Standard

error

Marginal

effect
Appendix III

Summary of GAO’s Regression Models

Page 33 GAO/HEHS-00-131 Pension Plans 

a

Reference = identifies the reference variable.

** = statistical significance at the .01 level.

* = statistical significance at the .05 level.

Source: GAO analysis of April 1993 CPS.

We also developed our pension choice model by closely following the 

analytical models pension experts use.3

 This model assesses several 

factors that could influence an employee’s decision to participate in a 

Public administration 3.8 -1.027 0.235 -19.9**

Manufacturing, durable goods 13.4 Referencea

Occupation

Executive, administrative, and 

managerial 21.8 0.230 0.112 5.7 *

Technician 16.4 -0.224 0.165 -5.5

Sales 36.2 0.191 0.130 4.7

Administrative support 20.6 -0.309 0.118 -7.5**

Private household 95.8 0.916 0.728 18.7

Protective service 11.3 0.482 0.271 11.4

Other service 50.9 0.461 0.132 10.9**

Precision production 28.5 0.057 0.137 1.4

Machine operator 25.2 0.132 0.156 3.3

Transportation 31.5 0.212 0.164 5.2

Handler 37.8 0.337 0.173 8.2

Farming, fishing, and forestry 73.9 0.700 0.328 15.5 *

Professional specialty 14.0 Referencea

3

Richard P. Hinz and John A. Turner, “Pension Coverage Initiatives: Why Don’t Workers 

Participate?” pp. 17-37, and R. L. Clark and S. J. Schieber, “Factors Affecting Participation 

Rates and Contribution Levels in 401(k) Plans,” pp. 69-97, in Olivia Mitchell and Sylvester J. 

Schieber (eds.), Living with Defined-Contribution Pensions (Philadelphia: The Pension 

Research Council, 1998).

(Continued From Previous Page)

Characteristic

Percentage

without

coverage

Logit

estimate

Standard

error

Marginal

effect
Appendix III

Summary of GAO’s Regression Models

Page 34 GAO/HEHS-00-131 Pension Plans 

defined contribution pension plan.4 For this model, the outcome variable is 

whether persons in the labor force choose to participate in a plan of this 

type of plan when the firm offers it. Because the factors influencing 

participation and coverage are similar, we generally used the same 

predictor variables in the pension choice model. We added a variable to 

assess whether the presence of a firm’s matching contribution is associated 

with participation. Employees who had defined-benefit coverage or were 

offered multiple defined-contribution plans were excluded from the model. 

These workers were excluded from the model in order to focus our 

analysis on workers with only the choice to participate in a 401(k) plan, 

with the 401(k) plan being the only plan offered by the firm.

Table 6 shows the characteristics associated with persons in the labor force 

who chose not to participate in a plan. Lack of a matching contribution by 

the firm, lower earnings, and shorter tenure were associated with an 

increased likelihood of choosing not to participate. Younger persons were 

less likely to participate compared with persons of middle age. Employees 

in firms with fewer than 100 employees were more likely to participate than 

employees in firms with 100 or more employees. Black employees were 

less likely to participate compared with white employees. 

Table 6: Characteristics Associated With Persons in the Labor Force Who Chose Not 

to Participate in a Pension Plan of the 401(k) Type, 1993

4

We considered individuals as participating in a plan of the 401(k) type if they responded 

“yes” to the following question: “Some retirement plans allow workers to make tax-deferred 

contributions to the plan. For example, you might choose to have part of your salary 

deposited into a retirement savings account, and then you do not pay income taxes on this 

money until you take it out or retire. These plans are called by different names, including 

401(k) plans, pre-tax plans, salary reduction plans, and 403(b) plans. Do you participate in a 

plan like this?” We classified individuals as covered by a 401(k)-type plan if they said their 

employer offered such a plan, whether or not they participated in it.

Characteristic

Percent

without

coverage

Logit

estimate

Standard

error

Marginal

impact

Income

Less than $20,000 37.3% 1.490 0.312 22.4%**

$20,000 to $39,999 16.4 0.604 0.288 13.8 *

$40,000 to $59,999 8.3 -0.061 0.310 -1.5

More than $59,999 7.6 Referencea
Appendix III

Summary of GAO’s Regression Models

Page 35 GAO/HEHS-00-131 Pension Plans 

Employer’s matching contribution

None 19.7 0.523 0.165 12.2**

Some 16.8 Referencea

Work status

Part-time 27.2 0.061 0.255 1.5

Full-time 16.8 Referencea

Age in years

21-29 26.4 0.667 0.183 14.9**

30-39 16.9 0.374 0.166 9.0 *

40-54 12.1 Referencea

Tenure

1 year or less 47.4 1.684 0.203 22.2**

More than 1 year 14.9 Referencea

Race or ethnicity

Black 29.9 0.603 0.239 13.8 *

Hispanic 26.5 0.334 0.293 8.1

Asian 6.49 -1.076 0.601 -20.4

White 16.37 Referencea

Gender

Male 14.9 0.177 0.162 4.4

Female 20.5 Referencea

Marital status and spouse’s work 

status and coverage

Married, spouse works but has no 

coverage 20.3 0.456 0.191 10.8 *

Married, spouse does not work 21.6 0.297 0.212 7.3

Married, spouse works and has 

coverage 16.5 -0.359 0.168 -8.7 *

Single 12.7 Referencea

Education

No high school diploma 23.7 0.110 0.362 2.7

High school diploma 19.0 0.310 0.216 7.6 *

Some college 21.2 0.494 0.192 11.6 *

College diploma 12.0 Referencea

Firm size

100 or more employees 18.3 0.455 0.203 10.8 *

Fewer than 100 employees 13.2 Referencea

 (Continued From Previous Page)

Characteristic

Percent

without

coverage

Logit

estimate

Standard

error

Marginal

impact
Appendix III

Summary of GAO’s Regression Models

Page 36 GAO/HEHS-00-131 Pension Plans 

a

Reference = reference variable.

** = statistical significance at the .01 level.

* = statistical significance at the .05 level.

Source: GAO analysis of April 1993 CPS.

Union status

Not a union member 14.5 0.178 0.230 4.4

Union member 17.8 Referencea

Industry

Construction 14.5 0.316 0.492 7.7

Manufacturing, nondurable goods 12.6 -0.139 0.291 -3.5

Transportation, communications, and 

utilities 18.6 0.214 0.330 5.3

Wholesale trade 11.7 -0.110 0.347 -2.7

Retail trade 22.0 0.495 0.263 11.7

Finance, insurance, and real estate 20.4 0.521 0.267 12.2

Business and repair 16.9 0.101 0.320 2.5

Hospital 35.0 1.263 0.292 21.7**

Medical, except hospital 19.1 0.051 0.423 1.3

Education 12.1 -0.079 0.390 -2.0

Other professional 11.6 0.078 0.380 2.0

Public administration 19.5 0.383 0.352 9.2

Manufacturing, durable goods 14.5 Referencea

Occupation

Executive, administrative, and 

managerial 9.8 -0.635 0.272 -14.4 *

Technician 14.9 -0.637 0.336 -14.4

Sales 13.4 -0.734 0.324 -16.1

Administrative support 25.2 -0.095 0.264 -2.4

Private household and other service 30.2 -0.023 0.384 -0.6

Precision production 16.9 -0.037 0.326 -0.9

Machine operator 19.7 0.018 0.355 0.4

Transportation 18.8 -0.382 0.459 -9.2

Handler 27.1 -0.489 0.436 -11.5

Professional specialty 15.8 Referencea

 (Continued From Previous Page)

Characteristic

Percent

without

coverage

Logit

estimate

Standard

error

Marginal

impact

(207081) Letr
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