November 1996

Comparison of Benefit Participation and Cost: State and Local Governments and Medium and Large Private Establishments

Benefit plan participation is high among state and local government employees. In this group, 87 percent of full-time employees participated in a medical care plan, and 96 percent participated in a retirement income plan in 1994. Among part-time employees in state and local governments, 31 percent participated in a medical care plan, and 58 percent participated in a retirement income plan in 1994.

Participation was lower in medium and large private establishments. In 1993, 82 percent of full-time employees in these establishments participated in a medical care plan, and 78 percent participated in a retirement income plan. Among part-time employees, 24 percent participated in a medical care plan, and 40 percent participated in a retirement income plan in the same year.

The most striking comparison of benefit participation rates between state and local governments and medium and large private establishments is in retirement income benefits. Nearly all (95 percent) of full-time employees in state and local governments who participated in a retirement income plan were in a defined benefit plan in 1994, compared with 72 percent of retirement income plan participants in medium and large private establishments in 1993.

Participation in a defined contribution plan was much higher (63 percent) among full-time employees in medium and large private establishments who participated in a retirement income plan in 1993 than among full-time state and local government employees who participated in a retirement income plan in 1994 (9 percent).

Employer costs for employee compensation were higher in state and local governments than in private industry. In 1996, total compensation costs in state and local governments amounted to $25.73 per hour worked, compared with $20.09 in medium and large private establishments. The percentage of total compensation costs devoted to benefits was roughly the same in state and local governments (30.2 percent) as in medium and large private establishments (30.1 percent).

Essential differences exist between state and local government employees and employees in private industry. Among these differences is the mix of occupations: state and local governments include a large proportion of highly skilled white collar occupations such as legislators, governors, and mayors, and service occupations such as police and firefighters. In the private sector, industries such as manufacturing and wholesale and retail trade include a large proportion of sales and other low compensation occupations.

The makeup of the compensation package affects the overall costs of compensation. Participation in benefits is high among state and local governments. Nearly all state and local government employees participate in a defined benefit retirement income plan, compared with slightly more than one-half of private-sector workers.

For more information, contact Ken McDonnell (202) 775-6342.

Source: EBRI Databook on Employee Benefits, Third edition (Washington, DC: Employee Benefit Research Institute, 1995).
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