New EBRI Research: Defined Contribution Worker Coverage Grows; Retirement Savers Continue Reliance on Stocks

1/21/2004

From: Jim Jaffe, 202-775-6353 or jaffe@ebri.org or Craig Copeland, 202-775-6356 or copeland@ebri.org both of the Employee Benefit Research Institute

WASHINGTON, Jan. 21 -- A growing majority of working heads of households in retirement plans depend on defined contribution plans. The segment relying solely on defined contribution retirement plans, such as 401(k)s, rose from 40.8 percent to 61.5 percent in the 1992-2001 period, according to new research from the Employee Benefit Research Institute (EBRI).

An added 17 percent of such workers had both "traditional" defined benefit pension and defined contribution plans at the start and end of the period studied.

From 1992 to 2001, the covered segment relying entirely on defined benefit pension plans declined by nearly half, to 21.3 percent. The new data are analyzed in the January 2004 issue of EBRI Notes ("Retirement Plan Participation and Asset Allocation"), which found that workers for largest employers remain most likely to have only a defined benefit plan.

The study found that those with defined contribution plans, which leave investment decisions to workers, were more likely to be invested mostly in stocks than in interest-earning assets. The tendency to favor stocks declined with age, but rose with income and education levels. Workers who also had defined benefit pension plans or both individual retirement account (IRA) and 401(k) plans were more likely to rely on stock investments. Such investments are typically made using mutual funds.

"Despite a robust economy in the 1990s, roughly half the work force lacks a retirement plan," said EBRI President and CEO Dallas Salisbury. "And those workers who have retirement plans increasingly make the investment decisions and bear responsibilities themselves."