IB#8 

Introduction

Employer-provided pensions play an important role in assuring a comfortable retirement. In 1992, they accounted for about 20 percent of the total wealth of middle-income households aged 51-61, second only to Social Security. However, many workers still lack pension coverage. After increasing sharply in the post-World War II period, the percentage of the private sector workforce covered by an employer-sponsored pension plan at any given point in time has remained around 50 percent since the 1970s. This constancy obscures two major changes, however. First, pension coverage has increased for women and declined for men, primarily reflecting the increased earnings and labor force participation of women and a decline for men in union membership and employment in large manufacturing firms. Second, a major shift has occurred in the types of plans from defined benefit to defined contribution. Defined benefit plans generally provide retired workers with a set amount based on their salary history, while benefits under defined contribution plans depend on the accumulated amount in a worker’s account. The shift to defined contribution plans reflects employment trends as well as conversion of plans...

For full paper in PDF

The authors are all with the Center for Retirement Research at Boston College (CRR). Alicia H. Munnell is the Director of the CRR and the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Annika Sundén is the Associate Director for Research of the CRR. Elizabeth Lidstone is the Research Coordinator of the CRR. This brief is adapted from a paper prepared for the Pension Rights Center’s “Conversation on Coverage” held in Washington, D.C. on July 24-25, 2001. The authors would also like to thank Sean Barrett, Mireille Samaan, Mauricio Soto and Catherine Taylor for able research assistance. Many people were very generous in providing data, expertise, and computer code during the preparation of the paper. Alan Gustman, Tom Steinmeier and Courtney Coile provided their computer programs for calculating pension wealth, John Woods at the Social Security Administration helped us manipulate the 1993 Pension Supplement to the CPS and reviewed a previous draft, and Patrick Purcell of the Congressional Research Service helped us reconcile our coverage numbers with those he has produced. Craig Copeland, Susan Grad, Alan Gustman, Ken McDonnell, Anna Rappaport, David Raynes, Dallas Salisbury, and Jack VanDerhei reviewed the entire document. Although we tried to respond to all our reviewers, they may still have some disagreements on particular issues. In the end, the opinions and conclusions are solely those of the authors.