This fact sheet provides data on the percentage of American workers who have access to and who participate in employer-sponsored pension plans. The data are from the National Compensation Survey (NCS), which is conducted by the Bureau of Labor Statistics (BLS). The NCS provides data on occupational earnings and the availability of employee benefits among U.S. workers.
From the summary:
The growing recognition that millions of Americans are ill-prepared for retirement has prompted a number of state and federal policy proposals to promote retirement security. Yet even the most promising proposals fail to acknowledge a prerequisite to sustaining long-term savings: access to flexible resources that can be tapped in an emergency or can support productive investments that can pay off over the long haul. One recently announced effort – the Obama Administration’s myRA program – is designed to facilitate access to a savings vehicles for the mostly low- and middle-income Americans who miss out on current savings opportunities. As currently designed, the program is unlikely to have a significant impact at scale on the long-term prospects of this group of workers. But with certain adjustments and policy reforms, myRAs could facilitate the creation of personal safety nets that would both provide short-term financial stability and lay the foundation for a secure retirement. Short-term, flexible savings are a crucial but overlooked piece required to solve the retirement puzzle.
Some state and local retirement systems have found a formula for stability.
Source: Danielle Miller Wagner, Joshua Franzel, Elizabeth Kellar, Amy Mayers, Bonnie Faulk, Alex Brown, Keith Brainard, Jeannine Markoe Raymond, Dana Bilyeu, and Ady Dewey, Center for State and Local Government Excellence and National Association of State Retirement Administrators, April 2014
– Pension reforms reduced the amount of retirement income new employees can expect to receive compared with that of existing employees. Reductions ranged from less than 1 percent to 20 percent.
– New employees can expect to work longer and save more to reach the benefit level of previously hired employees.
– Hybrid plans adopted in five states produce a wide range of estimated retirement incomes. Holding investment returns constant, the determining factor in the size of the hybrid benefit is employee and employer contributions. For this analysis those states with higher required contributions produce a higher benefit than those whose statutory contribution rates are lower.
– Changes to retirement plans include an increase in the number of years included in the final average salary calculation (21 states); a reduction in the multiplier (12 states); and a change to both of these variables (nine states).
The report calculates the retirement income that state and local employees hired under the new benefit conditions can expect, and compares it with the retirement income they would have earned before the plan was changed. The report was produced with financial support from AARP.
Since 2009, 45 states have responded to fiscal constraints by making significant changes to their retirement plans, including increasing employee contributions, reducing benefits, or both. Other states have modified their plan design, choosing to transfer more of the risk associated with providing retirement benefits from the state and its political subdivisions to its employees.
The report also summarizes interviews conducted with public sector human resource executives and retirement experts from 10 states that have made significant pension plan changes (Alabama, California, Colorado, Hawaii, Missouri, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia).
Although newly hired employees will need to work longer or save more to have the level of retirement benefit that employees previously earned, state human resource officials say that wage stagnation and the increased cost of benefits for employees is a more immediate concern. To address the savings gap, many plan administrators are providing enhanced
From the abstract:
There are two competing theories of why public companies pay executives generous retirement benefits. One is that retirement pay is easier to hide from shareholders than other forms of compensation. The other is that retirement benefits align executives’ interests with those of long-term creditors, since the executives may not receive their payouts if the firm goes bankrupt. The latter view depends on the assumption that retirement benefits put executives in a similar contractual position as the company’s creditors. Yet no previous work has tested that assumption.
This Article provides the first systematic study of the contractual structure of executive retirement payouts. Using retirement pay data for thousands of executives, we show that a large proportion of executives link the value of their payouts to the company’s stock price and receive the bulk of these payouts immediately following their departure — features that contradict the incentive-alignment theory of retirement pay. The evidence also shows that the full amount and structure of retirement pay are undisclosed — findings consistent with the camouflage theory. While the structure of some executives’ payouts can be reconciled with the incentive-alignment theory, current rules do not give investors the information they need to tell the difference between payouts that align incentives and those that camouflage compensation. Lawmakers should require companies to reveal the magnitude and structure of these payouts, and neither regulators nor commentators should assume that retirement benefits suppress top managers’ appetite for risk.
From the abstract:
This paper develops a new measure of state and local fiscal sustainability called the “trend gap,” which is based on socioeconomic and other fundamental factors and removes the short-term influence of the business cycle. The paper estimates the trend gap and finds that the nationwide per capita trend gap has been on a growing path over the past three decades, a different conclusion than found in previous studies. Social insurance and income maintenance programs have played a major role in the growth of the trend gap, while pension and other post-employment benefits (OPEB) plans have become increasingly important in driving it up. In addition, there are large and growing disparities in the trend gap across states.
This series is adapted from Growing Apart: A Political History of American Inequality, a resource developed for the Project on Inequality and the Common Good at the Institute for Policy Studies and inequality.org. It is presented in nine parts. This introduction lays out the basic dimensions of American inequality and interrogates the usual explanatory suspects. The next eight parts will develop a political explanation for American inequality, looking in turn at labor relations, the minimum wage and labor standards, job-based benefits, social policy, taxes, financialization, executive pay, and macroeconomic policy.
· The Union Difference: Labor and American Inequality
· The Bare Minimum: Labor Standards and American Inequality
· The Perils of Private Welfare: Job-Based Benefits and American Inequality
· A Tattered Safety Net: Social Policy and American Inequality
….This issue of Beyond the Numbers looks at the frequency with which health and defined-benefit plans are available to unmarried opposite-sex and same-sex domestic partners. The availability of benefits is referred to as access to benefits and in these data it is expressed as (1) the percentage of workers whose employers extend benefits to certain family members, and (2) the percentage of workers covered by a plan that allows benefits to be extended to certain family members. These data focus on whether benefits are available to unmarried family members (not whether they make use of the benefits); the survey does not include a question about the number of family members nor does it inquire about family relationships….
From the summary:
– On average, executive benefit plans deliver an additional 5% to 7% of earnings in annual retirement income to a mid-level executive.
– About half of organizations that sponsor employer-paid nonqualified plans offer only pure restoration executive benefits.
From the summary:
– Fifteen of the local government employers offer only one type of plan; all 20 local government employers in the study offer at least one 457 savings plan.
– Most plans allow loans.
– Employers match employee contributions in just four plans.
– Employees need more financial literacy and good information about plans to make optimal decisions when they have more choices to make.
– More choices for employees may not be better if the quality of the plans, in terms of fees and investment options, is inferior to the quality of a more restricted access model.