Overall, private-sector employees are more than four times as likely to have access to a defined contribution plan than a defined benefit plan, according to the U.S. Bureau of Labor Statistics (BLS).
The BLS in “TED: The Economics Daily” reports that in its most recent National Compensation Survey, across all industries, 15% of workers employed by private-sector employers had access to a DB plan, whereas 67% percent had access to a DC plan.
More than Meets the Eye
Those composite figures are only part of the story, however. Averages are always derived from extremes, and these figures are no exception.
Sector-specific. The BLS found sharp differences between different industry sectors, yet also some broad similarities regarding access to DB plans and DC plans.
Workers employed by private-sector employers whose activities centered on financial matters were far more likely to have access to a DB plan than any other sector. Around 33% of the financial sector employees had access; the next most likely to have access were those in the information industry, 22% of whose members did.
The same industry sectors were most likely to provide access to their employees regarding both DB and DC plans: financial activities was at the top in both cases, followed by the information industry and then the manufacturing sector.
The leisure and hospitality sector was the least likely of the industrial sectors ranked to make both DB and DC plans available to their employees. Approximately 28% of employees in that sector had access to a DC plan, and a mere 2% could chose to be covered by a DB plan.
Employers in all sectors were far more likely to provide access to a DC plan than a DB plan, the BLS found.
Access > Participation. Access does not necessarily translate to participation, the BLS found. In every industry category, the percentage of employees who participated in a DB plan or a DC plan was not as high as the percentage of who could.
Overall access to a DC plan stood at 67%, but actual participation by those who could came to just under half, at 49%. For DB plans, those figures stood at 15% and 11%, respectively.
The gap was smallest for employees in the construction sector and the leisure and hospitality sector who had access to a pension plan—the BLS reports full participation in both.
The next closest was the information sector regarding both DC and DB plans. For DC plans in that industry, roughly 82% had access and around 75% participated; for DB plans, those figures stood at 22% and 20%, respectively.
The gap between access to a retirement plan and actually participating in one was greatest for the leisure and hospitality sector regarding DC plans, and for the financial sector concerning DC plans. In both cases, approximately half of the employees who could participate did so.
Why?
The shift from the prevalence of DB plans to DC plans is not new. “One of the notable trends in the U.S. retirement system over the past five decades is that private-sector employees have become less likely to be covered by defined benefit (DB) pension plans and more likely to be covered by defined contribution (DC) pension plans,” said the Congressional Research Service (CRS) in a report they released in late 2021.
“This general shift from DB to DC plans in the private sector occurred for a number of possible reasons,” says the CRS. Among them:
- employer costs are generally higher for DB plans than for DC plans;
- contributions to DC plans tend to be a more predictable cost than contributions to DB plans;
- DC plans are easier to administer than DB plans;
- for some employees, DC plans may be preferable to DB plans because DC plan account balances are portable.
About the National Compensation Survey
The data is derived from the National Compensation Survey the BLS conducted in Mary 2023. The survey includes information concerning 126,227,200 individuals who worked for 6,930,620 employers in the private sector.
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