Cherry Blossoms in Washington, DC
1979 was a pretty good year if you were a Pittsburgh sports fan. The Steelers won the Super Bowl in January and the Pirates won the World Series in October. Willie Stargell was the MVP of the World Series, with the song "We Are Family" playing everywhere. 1979 also is a good starting point for looking at how the retirement space has changed over time. If you worked in the private sector that year, chances are more likely than not that you had a defined benefit (DB) plan rather than a defined contribution (DC) plan.
The Employee Benefit Research Institute (EBRI) has published data outlining just how much pension coverage has become DC-centric over 3+ decades. Interestingly, in both 1979 and 2011, an estimated 45% of all private-sector workers were covered by either a DB or DC plan. Over the years, the figure has remained relatively steady in the 45%-50% range. What is different is that of those who are covered by a retirement plan, there has been an almost complete transformation from DB to DC. For those participating in a retirement plan in 1979, 62% were in a DB plan, 16% in a DC plan, and 22% in both. By contrast, in 2011, 7% were in a DB plan, 69% in a DC plan, and 24% in both.
These days, many DC plans have added automated features to help participants save better. Some have suggested that this makes the DC plans more DB-like. With the well-documented struggles of participants to save, it will be interesting in the future to see if there is a move toward the center in terms of DB and DC coverage.
BLS report shows declining DB coverage
The Bureau of Labor Statistics (BLS), part of the U.S. Department of Labor, has published an article in the December 2012 Monthly Labor Review, showing changes over the years to coverage via defined benefit (DB) plans.
In the 1980s, DB plans were still fairly common. According to the BLS, in 1981, more than 80% of full-time workers in large establishments were covered in a DB plan. Even in the early 1990s, about 35% of all workers in private sector establishments of all sizes were covered by a DB plan. As of 2011, the figure dropped to 18%. The one area in which DB coverage is still substantial is for state and local government employees (78% as of 2011), but even this is the subject of debate during state budget discussions.
One in four DB participants are in frozen plans (closed to future participants), with the percentage increasing as more people retire and no new participants can join the DB plan. While 10% of private industry employers offer DB plans, the figure is 48% for employers with 500+ employees. DB plans cover about two out of every three union members in private industry, but only about one in eight nonunion workers. The utility industry has the greatest DB coverage, with 81%; other industries trail far behind. The Mid-Atlantic and Midwest states have the greatest concentration of DB plans.
You can find the full article, The Last Private Industry Pension Plans: A Visual Essay, on the BLS website.
Blog Author - Ken Felsher
With over 25 years of writing, editing, and research experience. I enjoy sharing with my readers my love of working with content on a variety of subjects.
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