Compensation and Working Conditions Summer 1999 15

Retirement Benefits

HILERY Z. SIMPSON

Retirement Benefits in

the Jacksonville, FL and

Tucson, AZ Construction

Industries

Recent test surveys revealed that construction workers in

Jacksonville, FL and Tucson, AZ were more likely to

have access to, and participate in, defined contribution

plans than defined benefit plans. In both cities, there was

considerable variation in the incidence and cost of

retirement benefits.

Hilery Z. Simpson is an economist in the Division of Compensation Data Estimation, Bureau

of Labor Statistics.

Telephone: (202) 606-6208

E-mail: Simpson_H@bls.gov

This is the second of two articles dealing with the results of two test surveys

on compensation in the construction

industry in the Jacksonville, FL and

Tucson, AZ Metropolitan Statistical

Areas. It reviews the retirement benefits results of these surveys. The first

article, which reviews the earning results, starts on page 8.

Workers with access to a benefit include those who currently have, or eventually

will be eligible for, the benefit. This

includes employees who have not yet

met an eligibility requirement or who

do not make required contributions.

For example, an employer may establish a length of service requirement

that the employee must satisfy to

qualify for a benefit. This employee

has access to the benefit. Similarly,

an employee may decline to participate in a retirement plan but still have

access to the benefit.

Participation is different than access. Workers are considered to participate in a retirement plan when the

employee is provided access or enrolled in the plan, or when the employer makes a benefit payment on

behalf of the employee.

Participation in a benefit is computed in two different ways. First,

participation is calculated as a percent

of all employees; and second, it is calculated as a percent of those employees having access to the benefit. The

surveys found that the majority of

employees with access to a benefit also

participated in the benefit.

Benefit data from the Jacksonville

and Tucson construction test surveys1

were published in the following formats:

• Percent of employees with access

to a benefit

• Percent of employees without

access

• Percent of employees participating in a benefit plan

• Percent of employees with access

participating in the plan

• Employers’ cost for the benefit

per hour worked per participant

In addition, BLS also publishes

data on the percent of employees

whose access could not be determined.
16 Compensation and Working Conditions Summer 1999

Costs and incidence rates

The incidence of retirement benefits

in Jacksonville, FL for construction

workers was higher than in Tucson,

AZ. Sixteen percent and 37 percent,

respectively, had access to defined

benefit plans and defined contribution

plans in Jacksonville, whereas the figures were 5 percent and 30 percent,

respectively, in Tucson. A lower

unionization rate in Tucson may, in

part, explain its lower incidence rate.

Union workers generally fare better on

benefits than do nonunion workers.

While the incidence and cost data

published from the Jacksonville and

Tucson test surveys are not strictly

comparable with other BLS compensation surveys, it is interesting to look

at some of the survey results. In 1997,

the Bureau’s Employee Benefit Survey (EBS) of medium and large private establishments found that 50 percent of full-time, blue-collar and

service employees participated in defined benefit plans.2 This stands in

contrast to the data from the Jacksonville and Tucson surveys noted earlier.3 Similarly, there was less participation in defined contribution plans

in the Jacksonville and Tucson test

surveys than in the EBS.

The lower incidence rates for Jacksonville and Tucson are probably a

result of the differing methodology

between the two surveys. The Employee Benefits Survey of medium and

large private establishments includes

those with at least 100 employees,

whereas the two construction surveys

included all establishments. Similarly,

the EBS data only cover full-time employees, although the Jacksonville and

Tucson surveys include part-time employees as well. Because retirement

plan participation is highest for fulltime employees in large establishments, it is only reasonable that the

EBS incidence rates are higher overall.

Employer costs for benefits, per

hour worked, also varied by city. Jacksonville employers paid more per hour

worked, on average, for defined contribution plans, and Tucson employers paid more for defined benefit plans,

as the tabulation shows.

Defined contribution

 plans ..................... $1.05 $0.67

Defined benefit

 plans ..................... 1.11 1.60

Employers’ cost data for providing

benefits are calculated by determining

the annual cost per participant and

then dividing by annual hours worked.

Employees not participating in the

plan are not included in the cost calculation. A possible reason for the difference could be that employers in

Jacksonville provide better, more

costly defined contribution plans,

while Tucson employers provide better, more costly defined benefit plans.

BLS also has data on national benefit costs from another of its surveys,

the Employer Costs for Employee

Compensation (ECEC). These data,

collected in March 1998, indicate that

full-time, blue-collar employees’ average cost per hour worked were $0.46

for defined benefit plans and $0.22 for

defined contribution plans in contrast

to those from the two construction surveys.

The cost data collected during the

construction surveys were much

higher than those found in the ECEC.

The large cost differences are partially

explained by the different methodologies used in each survey. For example,

the ECEC data represent the average

cost per hour worked for all employees (whether they participated in a plan

or not), whereas cost-per-hour-worked

data from the construction surveys are

only for those employees who actually

participated in a plan. As such, the

expected reported costs should be

higher in the construction test surveys

than in the ECEC.

Defined benefit retirement plans

A defined benefit retirement plan provides employees with a specified retirement benefit, usually monthly annuity payments. The benefit formula

is predetermined and is commonly

based on salary and length of service.

The employer contributions are not

fixed, except in multi-employer plans.

All employers are obligated to provide

enough funds to pay anticipated future

benefits, including additional contributions to make up for any investment

losses by the pension fund. Common

provisions of defined benefit plans are

survivor annuities, disability retirement, early retirement, and coordination with Social Security payments.

As shown in table 1, the percent of

employees in the construction trades

with access to defined benefit retirement plans varied by city. With only

a few exceptions, the reduced level of

access to defined benefit plans in Tucson was seen across occupations. For

example, 47 percent of electricians and

24 percent of plumbers in Jacksonville

had access to defined benefit plans,

while 21 percent and 7 percent of their

respective counterparts in Tucson had

access. Even with these differences,

the studies found similarities between

the two cities. For example, no painter

supervisors, painters, or welders in

either Jacksonville or Tucson had access to defined benefit plans, whereas

truckdrivers and construction helpers

had low levels of access.

TABLE 1. Percent of employees with

access to defined benefit retirement

plans, construction industries by

occupation, Jacksonville, April 1998

and Tucson, May 1998

 All blue-collar

 occupations ........ 16 5

Carpenter

 supervisor ................ 40 0

Carpenters .................. 16 4

Construction laborers ... 3 7

Electrician

 apprentices ............... 75 60

Electricians .................. 47 21

Heating, air condition-

 ing, and refrigeration

 mechanics ................ 6 11

Helpers, construction

 trades ....................... 4 3

Helpers, mechanics

 and repairers ............ 0 14

Painter supervisors ..... 0 0

Painters ....................... 0 0

Plumbers ..................... 24 7

Roofers ........................ 11 0

Sheetmetal duct

 installers ................... 66 12

Truckdrivers ................. 3 5

Welders and cutters .... 0 0

Jacksonville, FL

Tucson,

AZ

Percent

Occupation

Tucson Jacksonville
 Compensation and Working Conditions Summer 1999 17

Retirement Benefits

The percentage of construction

employees with access to defined benefit plans also varied by occupational

group. Precision production, craft and

repair occupations, at 24 percent in

Jacksonville and 6 percent in Tucson

had the greatest access; transportation

and material moving occupations were

less likely to have access. The differences in access among the occupations

might be explained by such factors as

skill level or employer size, but the

survey did not examine this issue.

The percent of employees participating in defined benefit plans nearly

mirrored the percent of employees with

access to the benefit. For example, 7

percent of plumbers in Tucson and 24

percent in Jacksonville had access to,

and participated in, the benefit. This

was true for every occupation in the

surveys with the exception of two:

Electrician apprentices and carpenters.4 Even though electrician apprentices had the highest level of access of

any occupation in Tucson, at 60 percent, their participation rate was 54

percent. Similarly, 16 percent of carpenters in Jacksonville had access, but

12 percent participated in the benefit.

The surveys also collected employer

cost data on defined benefit plans.

These data are tabulated as an average cost per hour worked per participant and, as shown in table 2, varied

by occupational group and city.

Defined contribution retirement

plans

Defined contribution plans specify the

level of employer contribution to the

plan, but not the formula for determining eventual benefits as in defined benefit plans. Instead, personal accounts

are set up for participants, and benefits depend on the amounts credited

to these accounts, plus investment

earnings. Although employers normally guarantee they will make contributions, the employee bears the risk

of fluctuation in investment earnings.

As shown in table 3, the percent of

employees in the construction trades

with access to defined contribution retirement plans varied between the two

test cities. These differences, however,

were less pronounced than the differences seen with defined benefit plans.

Thirty-seven percent of the occupations sampled in Jacksonville had access to defined contribution plans,

compared to 30 percent in Tucson.

Differences in occupations having access were found. For example, 33 percent of carpenter supervisors and 76

percent of electricians in Jacksonville

had access to defined contribution

plans compared to 11 percent and 35

percent, respectivly, in Tucson. Even

with these differences, similarities between the two cities were found. For

example, 26 percent of carpenters in

Jacksonville had access, compared to

24 percent in Tucson.

The percentage of construction

employees with access to defined contribution plans also varied by occupation. Transportation and material

movement occupations were more

likely to have access, whereas machine

operators, assemblers, and inspectors

TABLE 2. Employer cost for defined

benefit retirement plans, per hour per

participant, construction industries by

occupation, Jacksonville, April 1998 and

Tucson, May 1998

 All blue-collar

 occupations ..... $1.11 $1.60

Precision production,

 craft, and repair ..... 1.16 1.97

Construction trades ... .93 2.05

Supervisors, con-

 struction trades ...... 1.47 -

Other precision

 production, craft

 and repair .............. 2.01 -

Elevator installers

 and repairers ......... 2.37 -

NOTE: Dashes indicate that no data were

reported or that data did not meet the publication criteria.

Employer cost

Occupation Jacksonville, FL

Tucson,

AZ

TABLE 3. Percent of employees with

access to defined contribution retirement plans, construction industries by

occupation, Jacksonville, April 1998 and

Tucson, May 1998

 All blue-collar

 occupations ..... 37 30

Carpenter

 supervisor ............. 33 11

Carpenters ............... 26 24

Construction

 laborers ................. 31 21

Electrician

 apprentices ........... 24 -

Electricians ............... 76 35

Heating, air condition-

 ing, and refrigera-

 tion mechanics ...... 38 51

Helpers, construction

 trades .................... 29 18

Helpers, mechanics

 and repairers ......... 30 53

Painter supervisors .. - 36

Painters .................... 18 12

Plumbers .................. 42 42

Roofers ..................... 12 22

Sheetmetal duct

 installers ................ - 34

Truckdrivers .............. 49 61

Welders and cutters .. - 19

 NOTE: Dashes indicate that no data were

reported or that data did not meet the publication criteria.

Percent

Occupation Jacksonville, FL

Tucson,

AZ

TABLE 4. Employer cost per hour per

participant for defined contribution

retirement plans, construction industries by occupation, Jacksonville,

April 1998 and Tucson, May 1998

 All blue-collar

 occupations .... $1.05 $0.67

Carpenters .............. .49 .84

Construction trades . 1.23 .77

Electricians .............. 1.67 .66

Heating, air condition-

 ing, and refrigeration

 mechanics ............ .63 .50

Helpers, construction

 trades ................... 1.00 .43

Laborers

 construction ......... .54 .68

Plumbers ................. .79 .56

Precision production,

 craft, and repair .... 1.21 .82

Supervisors, con-

 struction trades ..... 1.37 1.18

Truckdrivers ............. .44 .44

Employer cost

Tucson,

AZ

Jacksonville, FL

Occupation
18 Compensation and Working Conditions Summer 1999

were less likely. The differences in

access among the occupations might

be explained by such factors as skill

level or employer size, but the surveys

did not examine this issue.

Unlike the pattern in defined benefit plans, the percent of employees

participating in defined contribution

plans did not mirror the percent of

employees with access to the benefit.

For example, 38 percent of the precision production, craft and repair occupations in Jacksonville had access

to defined contribution plans, but 25

percent participated in them. This was

true for every occupation in the surveys. A probable barrier to participation is that employees usually are required to contribute to the plan, thus

lowering plan participation rates.

In addition to collecting incidence

data, the two construction surveys also

collected employer cost data on defined

contribution plans. These data are tabulated as an average cost per hour worked

per participant. The employer cost of

defined contribution plans averaged

$1.05 per hour in Jacksonville and $0.67

in Tucson. As shown in table 4, costs

varied by occupation and city.

1

 See Robert W. Van Giezen in this issue for

information about the test surveys. 2

 Includes production, craft, repair, laborer, and

service occupations. 3

 Several other significant differences exist

between the Davis Bacon test surveys and the

Employee Benefit Survey (EBS). First, occupational categories between the two surveys are not

comparable. The EBS blue-collar category also

includes data for service employees while the

Davis Bacon surveys published data on blue-collar workers exclusively. Second, the EBS is a

national survey while the Davis Bacon surveys

are for specific MSAs. Third, the EBS medium

and large private establishment survey only collects data for those establishments with 100 or

more employees. The Davis Bacon test surveys

did not have a size restriction and thus included

smaller establishments that are less likely to provide retirement benefits. Finally, the EBS data are

for full-time employees, while the Davis Bacon

test surveys published data for full- and part-time

employees. 4

 Apprentices are defined as workers who learn

a recognized skill, craft, or trade requiring one or

more years of on-the-job training through job experience supplemented by related instruction.

Apprentices must be in a formal program with an

agreement or contract with the employer to be included in this survey.

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