Closing the Coverage Gap

The Problem

The main reason that U.S. workers end up with inadequate retirement savings is that, at any given time, only about half of workers ages 25-64 are participating in an employer-sponsored pension, mostly due to a lack of coverage (see Figure 1).

Line graph showing the percentage of workers ages 25-64 participating in an employer-sponsored pension, 1989-2022

Workers can be uncovered in three ways: 1) their employer does not offer a plan; 2) their employer does offer a plan, but they are not included; or 3) they are self-employed. The first group accounts for three-quarters of all uncovered workers (see Figure 2). Initiatives to close the coverage gap generally focus on expanding coverage to the first group, but some also aim to eventually include the other groups.

Pie chart showing uncovered workers by reason uncovered, 2018

Federal Initiatives

At the federal level, several initiatives to address the coverage gap have been enacted over the years (see Table 1). These programs have relied on the voluntary participation of employers and therefore have had little impact.

Table showing the federal provisions enacted to address the coverage gap since 1975

Learn More about Enacted Federal Provisions

Legislative proposals for mandatory programs are more likely the answer (see Table 2).

Table showing recent federal proposals to close the coverage gap

Learn More about Federal Proposals

State Initiatives

In the absence of meaningful federal action, states have seized the issue (see Figure 3). The inclusion of a mandate for employers is a significant differentiator for state programs. Mandatory auto-IRAs require employers without a retirement plan to auto-enroll their employees in an Individual Retirement Account (IRA). Voluntary programs, which involve “marketplaces,” multiple employer 401(k)s, and voluntary auto-IRAs, allow the employer to choose whether to participate (see Table 3).

Table showing the types of state programs, by account type and employer role

The mandatory programs are showing potential in the early phases (see Table 4). In contrast, voluntary programs have had virtually no impact, with less than a 1-percent take-up rate.