U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 1

Access, Participation, and Take-up Rates in Defined Contribution Retirement

Plans among Workers in Private Industry, 2006

by Allan Beckmann

Bureau of Labor Statistics

Originally Posted: December 27, 2006

Employee participation rates for defined contribution retirement plans vary widely among groups of workers and their

employers, primarily reflecting how frequently the employers provide access for employees to participate in these plans.

Anyone reading the business section of one of the Nation’s major newspapers over the last several years is likely to be

aware of the shift that is currently taking place in American private sector employer-provided retirement plans. The transition

continues toward less reliance on defined benefit plans and a much greater emphasis on defined contribution plans.1 In

1992-93, 32 percent of workers in private industry participated in a defined benefit plan while 35 percent participated in a

defined contribution plan.2 According to the 2006 National Compensation Survey benefits data,3 the participation rate for

private industry workers in defined benefit plans has decreased to 20 percent, while participation in defined contribution plans

has increased to 43 percent. As can be seen in chart 1, however, the employee participation rates in defined contribution

retirement plans vary widely across worker and establishment characteristics.

The chart also shows that more than half of all workers in white-collar occupations, higher paying jobs ($15 or more per

hour), and those in large establishments (100 or more workers) participate in defined contribution retirement plans. In

contrast, 16 percent of part-time workers and 20 percent of workers in service occupations participate in such retirement

plans.

Two other statistics that give additional insight to participation rates are access rates and take-up rates. Access rates

measure the proportion of employees who work for employers who offer them a retirement plan. Take-up rates measure the

proportion of employees among those with access who choose to enroll in the plans.4 Take-up rates differ from participation

rates because they reflect the elections of only those workers who actually have access to a retirement plan. Participation

rates reflect the status of all workers, including those without access to a retirement plan.

National Compensation Survey data demonstrate that the differences observed in participation rates for defined contribution

plans are due more to access rates than to take-up rates. This is true across worker characteristics. While access rates vary
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 2

widely among groups of workers, take-up rates are consistently robust. Greater variability in access produces greater

variation in participation rates.

Table 1 shows the consistently robust take-up rates and the large differences among worker characteristics in access rates.

From a low of 65 percent for service workers and part-time workers to a high of 86 percent for union workers, the data show

that if offered a defined contribution retirement plan, the vast majority of private industry workers will opt to enroll. In contrast

to the consistently high rate of take-up rates, access rates differ considerably. While only 25 percent of part-time workers

have access, 63 percent of full-time workers and 70 percent of workers in establishments of 100 or more workers have

access to defined contribution retirement plans.

Access rates have a large impact on participation rates. For example, although workers in small and large establishments

elect to enroll in defined contribution plans at similar rates, about half of workers in establishments employing 100 or more

workers participate in a plan, compared with about one-third of those in smaller establishments. These differences largely

reflect the access rates of workers in the two establishment size classes. (See table 2.)

Workers in lower wage jobs appear to be at a disadvantage when it comes to saving for retirement. According to the report

from the Department of Labor’s 2006 National Summit on Retirement Savings, not only do lower wage workers generally

have less access to defined contribution retirement plans, they also tend to have less money available for savings. The report

states that when "low-income workers receive their paychecks, many have already committed all or most of the money to

covering [their] day-to-day expenses. Making savings a spending priority by setting aside money in a personal retirement

account seems next to impossible."5

The apparent disadvantage that workers in lower wage jobs face is exacerbated by the fact that many of the plans offered to

them require an employee contribution in order to receive the employer contribution. In 2003, 85 percent of workers in jobs

paying less than $15 per hour and who participated in a defined contribution retirement plan were enrolled in plans that

required an employee contribution.6

Union workers generally have greater access to most kinds of employer-provided benefits than nonunion workers. One

exception is in access to defined contribution retirement plans. Only 50 percent of union workers have access to defined

contribution plans, compared with 55 percent of nonunion workers. An explanation for this is that union workers have a long

history of maintaining access to defined benefit plans as their primary form of retirement plan. Defined benefit plans predate

defined contribution plans by almost a century. When defined contribution plans began to appear, union workers already

enjoyed widespread access to and participation in defined benefit plans.

Because many of the worker characteristics are interrelated, the effects that one worker or establishment characteristic might

have in depressing or amplifying the access rate in other characteristics were examined. Part-time workers are more

prevalent in service occupations, lower wage jobs, and smaller establishments than they are in white-collar and blue-collar

occupations, higher wage jobs, and larger establishments. Also, because part-time workers experience the lowest access to

defined contribution retirement plans, access rates were compared using only full-time workers as a method to control for

work schedule status. The differences diminished but remained quite noticeable. (See table 3.)

The access rate for full-time workers in lower wage jobs was higher (53 percent) than the access rate for all workers in lower

wage jobs (43 percent), but it still trailed the access rate for full-time workers in higher wage jobs (72 percent) by a

substantial margin. Similarly, at 50 percent, the access rate for full-time workers in small establishments also was higher than

the rate for all workers in small establishments, but it still trailed the access rate for full-time workers in larger establishments.

Thus, this analysis concludes that while the various characteristics are interrelated, the interrelation does not appear to

obscure the basic differences observed in access rates.

NOTE: Standard errors have not been calculated for NCS benefits estimates. Consequently, none of the statistical inferences

made in this report could be verified by a statistical test.

Allan Beckmann

Economist, Division of Compensation Data Estimation, Office of Compensation and Working Conditions, Bureau of Labor
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 3

Statistics.

Telephone: (202) 691-6271; E-mail: Beckmann.Allan@bls.gov

Notes

1 For more information on defined benefit plans and defined contribution plans, see BLS Glossary, available on the Internet at http://

www.bls.gov/bls/glossary.htm#D. 2 See Stephanie L. Costo, "Trends in retirement plan coverage over the last decade," Monthly Labor Review, February 2006; available on the

Internet at http://www.bls.gov/opub/mlr/2006/02/art5full.pdf.

3 National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2006, Summary 06-05 (Bureau of Labor

Statistics, August 2006); available on the Internet at http://www.bls.gov/ncs/ebs/sp/ebsm0004.pdf.

4 Take up rates from the NCS equal the ratio of employees in surveyed jobs who participate in plans to the employees in surveyed jobs who

are offered the plan. Some surveyed jobs are not offered the plan because all workers in the job are ineligible for reasons such as part-time

work schedules. Other estimates of take-up rates generally are calculated for the entire establishment reflecting the ratio of all workers in the

establishment who participate in the plan to the number who are eligible for the plan.

5 Saving for Your Golden Years: Trends, Challenges, and Opportunities, report from the Department of Labor National Summit on Retirement

Savings, March 2006; available on the Internet at http://www.dol.gov/ebsa/pdf/2006background.pdf.

6 See National Compensation Survey: Employee Benefits in Private Industry in the United States, 2003, Bulletin 2577 (Bureau of Labor

Statistics, October 2005), table 59, p. 74; available on the Internet at http://www.dol.gov/ncs/ebs.sp/ebbl0021.pdf.

Table 1: Access and take-up rates for defined contribution retirement plans among workers in private industry,

National Compensation Survey, 2006

[In percent]

Characteristic Access Take-up Rate

All Workers 54 79

White Collar 65 82

Blue Collar 53 77

Service 30 65

Full time 63 80

Part time 25 65

Less than $15 per hour 43 71

$15 per hour or more 69 85

1-99 workers 41 81

100 or more workers 70 77

Union 50 86

Nonunion 55 78

Table 2: Take-up, access, and participation rates in defined contribution retirement plans by establishment size,

National Compensation Survey, 2006

[In percent]

Size of Establishment Take-up Rate Access Rate Participation Rate

1-99 workers 81 41 33

100 or more workers 77 70 54
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

Page 4

Table 3: Participation, access and take-up rates for defined contribution retirement plans among full-time workers in

private industry, National Compensation Survey, 2006

[In percent]

Characteristic Participation Access Take-up

All Workers 51 63 81

White Collar 60 72 83

Blue Collar 44 57 77

Service 30 45 67

Less than $15 per hour 39 53 74

$15 per hour or more 61 72 85

1-99 workers 42 50 84

100 or more workers 59 75 79

Union 47 55 85

Nonunion 51 64 80

Data for Chart 1. Participation in defined contribution retirement plans by selected worker and establishment

characteristics, private industry, 2006

Characteristic Participation

All workers 43

White collar 53

Blue collar 40

Service 20

Full time 51

Part time 16

Less than $15 per hour 31

$15 or more per hour 58

1-99 workers 33

100 or more workers 54

Union 44

Nonunion 43

U.S. Bureau of Labor Statistics | Division of Information and Marketing Services, PSB Suite 2850, 2 Massachusetts Avenue, NE Washington, DC

20212-0001 | www.bls.gov/OPUB | Telephone: 1-202-691-5200 | Contact Us