EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction EBRI Testimony: Senate Finance SC on L-T Growth & Debt Reduction June 29, 2006 June 29, 2006 June 29, 2006 June 29, 2006 June 29, 2006 June 29, 2006 June 29, 2006 June 29, 2006 June 29, 2006 Figure 12 Figure 10 Figure 5 Figure 1 Figure 7 Figure 3 Distribution of Wage and Salary Workers Age 21–64, by Industry for Each Employer Size, 2004 Percentage of Private-Sector Wage and Salary Workers Age 21–64 Participating in Percentage of Wage and Salary Workers Age 21–64 Participating in an Distribution of Private-Sector Wage and Salary Workers Age 21–64, by Employer Size, 2004 Percentage of Employment-Based Retirement Plan Family Head Percentage of Private-Sector Wage and Salary Workers Age 21–64 Participating in an Employment- Mr. Chairm While the percentage of workers who partic an and members of the comm Employment-Based Retirement Plan, by Employer Size, 1991 and 2004 ittee, my ipated in a plan was lower across various name is Craig Copeland of the Employee T-146 an Employment-Based Retirement Plan, by Work Status and Employer Size, 2004 Participants in Each Plan Type, by Employer Size, 2004 Based Retirement Plan, by Annual Earnings and Employer Size, 2004 50% 60% 47% characteristics of workers or em Benef 80% 90%it Research Institute (EBRI), ployers, im where I am portant a Senior Res differences in the types of workers in sm earch Associate and Project Directo all r 70% 90% 55.3% 86% 83% 44% 82% versus large em of the Social Security Refor ployers remain. m Evaluation Program. 45% 82% 61.9% Written Statement 78% 80% 77% 68% 80% 70% • Small employers have a disproportionate percentage of work 76% ers with annual earnings 59.2% 76% 60% 50% 39% 1991 2004 39% 39% for the 40% 73% 73% 72% 38% 38% My focus today is the participation in em below $15,000: 31 percent at firmploy s with fewer than 10 em ment-based retiremeployees, com nt plans in sm pared with 20 per- all employers, 70% 44.7% 70% 36% 35% 70% 59% 66% 60% 50.8% 34% and the dem cent at em ographic ch ployers with 100 or m aracteristics of so m re employees (F all employers that aff igure 6). ect the participation in these 64% 35% 64% Figure 9 63% 50% 46.8% plans. I’ll also exam • Small employers are m ine the breakdo ore likely to be in th wn of retirement plan participan e personal service industr ts in each type of plan: y and less likely to 40% 60% 58% Distribution of Private Sector Wage and Salary Workers 21–64, 57% 57% 60% Subcommittee on Long-Term Growth 43.0% 30% 50% 54% 35.2% defined contribution or 4 be in the manufacturing industry, the industries 01(k)-type plan and define 28% d benefit pension plan. with lowest and highest overall levels of 40.8% 47% by Various Characteristics and Employer Size, 2004 39.6% and Debt Reduction 50% 40% 49% 50% 50% participation, respectively (Figure 7). 24% 25% 40% Number of Employees 43% 30% 22% The definition of a s • Small employers have lo mall employer used in this wer shares of37% full- research is one with fewer than 100 employees. time workers and higher shares of part-time 30.8% 34% 39% 20% Senate Committee on Finance 40% 19% 40% Fewer 1,000 32% 30% 20% 36% The data used to analy workers, when com ze this pared with larger em group’s participation in em 31% ployers (Figure 8). It is of note that when ployment-based retirement plans come 31% 17% 27.2% All Than 10 10–24 25–99 100–999 or More 30% 31% 30% from the Census Bureau’s March 2005 Current Population Survey (CPS). According to these 20.1% examining some important worker characteristics ?such as age, gender, and 28% 27% 25% 14% 30% 30% 15% 20% All 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 18.2% 19.8% 13% 13% 24% data, 44.7 percent of private-sector 20% wage and salary workers age 21 20% -64 worked for a small race/ethnicity ?no significant differences emerged between the small employer and large 20% 22% 11% Age 22% 14.8% 21% 16.0% 18% 20% 10% 9% 17% 18% 16% 20% 10% Hearing on: employer, 18.2 percent for an em 20% ployer with fewer than 10 employees, 11.6 percent for an employer work forces (Figure 9). 17% 8% 21–24 11.6% 10.6 9.6 12.2 10.0 9.3 11.5 15% 11.9% 14% 12% 12% 13% 12% 13% “Small Business Pension Plans: How Can We Increase Worker Coverage?” 10% employer with 10 10% 25–34 -24 employees, and 14.8 percent for one with 25 25.5 23.0 27.5 26.6 -99 employees (F 25.9 igure 1). 25.4 10% 9% 8% 10% 5% 8% 10% 10% 3% 6% The CPS does not include plan type, but the 35–445% 26.8 Federal Reserve Board’s Survey of Cons 27.6 6%26.8 6% 6% 26.9 26.4 um 26.6 er 1 45–54 24.1 Thursday, June 29, 2006 25.5 22.0 24.1 24.8 23.7 Finances (S A gap in retirem 0% CF) does provide this infor ent plan participation between mation. small and large employers has existed for many 0% 0% 0% 0% Agriculture, mining, and construction Manufacturing Wholesale and retail trade Personal services 55–64 0% 13.0 14.3 11.5 12.4 13.5 12.8 Less Than $15,000 All Fewer Than 10 $15,000–$29,999 10–24 Employees $30,000–$49,999 25–99 Employees $50,000–$74,999 100–999 Employees $75,000 or more 1,000 or More years, and in 2004 sm • Participants of e Defined Benefit Plan Only Full-time, full-year all-firm mployment-b workers had a part Defined Contribution Plan Only Full-time, part-year ased retirem icipation level half that of large em ent plans working for sm Part-time, full-year Both Plans all employers are more Any Defined Contribution Plan Part-time, part-year ployers: Industry Fewer Than 10 10–24 Employees 25–99 Employees Fewer Than 100 100 or More 100–999 Employees 1,000 or More Employees Employees Gender Annual Earnings Work Status Plan Type • likely to have a defined contribution (401(k) Specifically, 26.7 percent of workers work Employees Employees ing for em -type) plan as their only plan, relative to Employees ployers with fewer than 100 Employees Employer Size All Fewer than 10 employees 10–24 employees 25–99 employees 100–999 employees 1,000 or more employees Male Fewer Than 10 Employees 10–24 Employees 54.2 25–99 Employees 56.0 56.7 100–999 Employees 57.0 1,000 or More Employees 53.7 51.5 Fewer Than 10 Employees Fewer Than 10 Employees 10–24 Employees10–19 25–99 Employees 20–99 100–999 Employees 100–499 1,000 or More Employees 500 or More Employer Size participants in larger em employees participated in an em ployers. For exam ployment-based ple, 77 percen retiremet of nt plan (Figure 2). This breaks the participants at firms with Female 45.8 44.0 43.3 43.0 46.3 48.5 Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the 2004 Survey of Consumer Finances. down into 16.0 percent at employers with fewer than 10 employees, 27.2 percent at Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. 10-19 employees were in a defined contribution plan only, compared with 57 percent at Race/Ethnicity employers with 10 to 24 employees, and 39.6 percent at employers with 25 to 99 firms with 500 or more employees (Figure 10). White 68.6 70.5 67.6 68.9 67.5 68.5 employees. • While the rates of having only a defined benefit plan (traditional pension) are similar Black 10.7 6.8 8.1 9.3 12.1 13.5 • This compares with 56.2 percent who worked for an employer with 100 or more Hispanic across employer sizes, participan 14.3 ts fro 16.0 m the large 18.0 st employers 16.5 are sign 14.4 ificantly m 11.3 ore Other em likely to have both types of plans (21 per ployees. 6.3 6.8 cent compared with 6 6.3 5.4 percen6.0 t). Smaller 6.7 Annual Earnings employers’ higher likelihood of having only a defined contribution plan for participants Figure 11 Figure 8 Figure 6 Figure 4 Less than $15,000 22.9 31.2 Figure 2 27.7 22.5 18.8 19.5 The reasons for these differences have been explored in EBRI’s Small Employer Retirement persists across each industry (Figure 11). Percentage of Employment-Based Retirement Plan Family Head Percentage of Private-Sector Wage and Salary Workers Age 21–64 Participating in an Employment Distribution of Wage and Salary Workers Age 21–64, Distribution of Wage and Salary Workers Age 21–64, - Percentage of Private-Sector Wage and Salry Workers Age 21–64 Participating in $15,000–$29,999 28.6 30.6 32.2 31.1 29.6 24.8 Participants in Each Plan Type, by Industry and Employer Size, 2004 Survey, where small employers prim by Work Status for Each Employer Size, 2004 arily cited either uncertain profits or lack of employee Based Retirement Plan, by Industry and Employer Size, 2004 by Annual Earnings For Each Employer Size, 2004 an Employment-Based Retirement Plan, by Employer Size, 2004 $30,000–$49,999 25.0 20.1 23.3 26.3 27.7 25.9 100% dem 80% and as the key reasons for why they tend to not offer retirement benefits. Despite the lower likelihood of 35% workers at small employers being in an employment-based 70% 70% 75% 75% 92% $50,000–$74,999 13.0 9.4 9.4 11.6 14.1 16.1 90% 90% 73% 32% 72% retirement plan, there is some good news: Their probability of being in a plan has increased since 90% 63% 86% 31% 86% 86% 86% $75,000 or more 70% 31% 10.5 8.8 7.4 8.5 9.7 13.6 This lower level of participation among small-em 62% ployer workers persists across earnings levels, 31% 61% 70% 80% 30% 79% 78% 1991. In 1991, 19.8 percent of workers at firms with 10 -24 employees participated in an 59.2% 30% 80% 76% 60% Work Status 60% industries, and work stat 64% us of the employees: 29% 74% 73% 28% 71% 28% 56.2% 70% 69% employment-based retirement plan before growing to 27.2 percent by 2004 (Figure 12). In Full-time, full-year 72.3 64.1 70.1 54%73.1 75.3 75.4 68% 67% 26% 67% • 70% For workers at firms with fewer than 10 employees earning less than $15,000 annually, 52% 26% 60% 65% 25% 50.8% 25% contrast, for em Full-time, part-year ployers with 1,000 or m 12.9 ore em 13.3 ployees, participation declined from 14.1 14.0 14.0 61.9 percent 11.3 59% 25% 5 percent were participants, compared with 17 percent in firm s with 1,000 or more 50% 50% 60% 23% 23% Part-time, full-year 8.5 13.3 8.9 7.4 6.0 7.9 23% in 1991 to 59.2 percent in 2004. 51% 45% 44% 50% employees (Figure 3). 43% 43.0% 50% Part-time, part-year 6.2 9.3 6.9 5.5 4.7 5.4 45% 20% 42% 20% • For workers earning $75,000 or more 39.6% annually, 36 percent participated in the smallest 20% 40% 40% Industry 19% 40% Thank you and I will be happy to answer any questions you may have. 35% 40% employers com 35% pared with to 86 percent in the largest em 33% ployers. 34% By 31% Agriculture, mining, and 16% 33% 32% 27% 30% 31% • For three industries (agriculture, mining, and construction; manufacturing; and wholesale 24% construction 23%10.0 18.9 17.5 12.8 8.1 2.8 22% 22% 14% 15% 21% 20% 30% 19% 30% Craig Copeland 14% 30% 13% 18% 18% 26.7% 27.2% 20% and retail trade), the percentage of employees participating in a retirement plan increases Manufacturing 37.5 24.1 28.3 35.6 39.1 47.4 1 14% 14% 12% 24% 14% The Survey of Consumer Finances (SCF) has similar breakdowns for employer size and industry but not exactly 10% 23% 10% 8% 10% Wholesale and retail trade 38.7 35.4 34.3 38.4 44.2 21% 38.9 from less than 25 percent for em Senior Research Associate ployers with fewer than 10 employees to just over 10% 6% 10% 5% corresponding to the March Current Population Survey (CPS). CPS has emp 9% loy 9% er sizes of fewer than 10, 10–24, 3% 10% 20% 20% 20% 9% 8% 0% Personal services 0% 13.8 21.7 20.0 13.1 8.6 10.9 60 percent for employers with 1,000 or more employees (Figure 4). However, the 25–99, 100–999, and 1,00 16.0% 0 or more, while the SCF has fewer than 10, 10–19, 20–99, 100–499, and 5 7% 00 or more. 14% 14% 14% 0% 15%13% 13% 13% EBRI Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. 11% Fewer Than 100 or More Fewer Than 100 or More Fewer Than 100 or More Fewer Than 100 or More Fewer Than 100 or More13% Fewer Than 100 or More The indust percentage of workers participating in pers ry categories in CPS are agriculture, mining, and co onal services ranges onl nstruction (which are separat y from 11 percent to ed in SCF), 9% 11% 9% 9% 8% 100 Employees 100 Employees 100 Employees 100 Employees 100 Employees 11% 100 Employees 10% 7% 5% 6% 6% 7% 6% manufacturi Employees ng (same in SCF), wholesale a Employees nd retail trad Employees e (which Employees has some industri Employees es that are separate Employees d in SCF from 5% 10% 10% 33 percent. 5% the finance Agriculture, forestry, and , insurance, real est Mining and construction ate, and business an Manufacturing d repair se rvi Wholesale and retail trade ces and the transp Finance, insurance, real ortation, communicat Transportation, ions, public • Among full-time, full-year workers, the percentage of workers participating increases fisheries estate, and business and communications, public 0% utilities, and personal and professional service industries), and personal services (which is part of the transportation, repair services utilities, and personal and “Participation by Employees of Small Employers 0% Full-time, full-year Full-time, part-year Part-time, full-year Part-time, part-year from 20 percent for the smallest firms to 68 percent for the largest firms (Figure 5). In 0% professional services 0% communications, public utilities, and personal and professional service industry in SCF). Less than $15,000 $15,000–$29,999 $30,000–$49,999 $50,000–$74,999 $75,000 or more Industry and Employer Size in Employment-Based Retirement Plans” Agriculture, mining, and construction Manufacturing Work Status Wholesale and retail trade Personal services All Fewer Than 10 10–24 Employees 25–99 Employees Fewer Than 100 100 or More 100–999 1,000 or More contrast, among part-time, part-year workers, the percentage participating ranged from Annual Earnings Employees Industry Employees Employees Employees Employees All Fewer than 10 employees 10–24 employees 25–99 employees 100–999 employees 1,000 or more employees Defined Benefit Plan Only Defined Contribution Plan Only Both Plans Any Defined Contribution Plan 6 percent to 14 percent. All Fewer than 10 employees 10–24 employees 25–99 employees 100–999 employees 1,000 or more employees Employer Size Fewer Than 10 Employees 10–24 Employees 25–99 Employees 100–999 Employees 1,000 or More Employees Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the March 2005 Current Population Survey. Source: Employee Benefit Research Institute estimates from the 2004 Survey of Consumer Finances. 3 2 “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” “Participation by Employees of Small Employers in Employment-Based Retirement Plans” 10 6 5 4 7 8 9