More Than Half of Workers in US Are Still Not on Any Workplace Retirement Plan

Employer-sponsored plans are a vital part of the US retirement system. Yet only about half of American workers participate in retirement benefits through their employer. Participation rates are even lower for part-time workers, workers at smaller businesses, and low-wage earners.  

Participation rates have been largely unchanged since the 1980s, but the types of plans in which workers participate have changed substantially. The percent of participating workers covered under a defined benefit plan, which guarantee a fixed set of benefits during retirement, has fallen dramatically—from 68 percent in 1989 to 29 percent in 2013. Instead, workers have been increasingly covered by defined contribution plans, like 401(k)s, where the employer and/or employee contribute a set amount money into an individual employee's account.

American workers also rely on Social Security, independent retirement accounts (IRAs), and home equity for their retirement income. Still, tens of millions of Americans are financially unprepared for retirement. A number of policies can help:

• Employers should establish automatic enrollment in their benefit plans while allowing individuals the ability to opt out.
• Employers that do not offer retirement plans should be required to automatically enroll their employees in an IRA, letting workers opt out if they want. Tax credits should be provided to cover administrative costs.
• The Department of Labor's conflict-of-interest, or fiduciary rule, which would require retirement advisers to act in the best interests of their clients, would help reduce costs from high-cost, low-return investments.  
• Congress should reject the American Health Care Act (AHCA) passed by the House of Representatives, because it would cut Medicaid spending by $834 billion and reduce the number of people with health insurance by 23 million. These steps would cause widespread financial insecurity.  

This PIIE Chart is adapted from Jason Furman's testimony for the US House of Representatives Committee on Education and the Workforce, Subcommittee on Health, Employment, Labor, and Pensions delivered on May 18, 2017.