Table 6 Table 4 Asset Allocation of Private Trusteed Single-Employer Pension Plans by Plan Type gTAT 401(k) EMENI'rTrends OF PAUL YAKOBOz3KI STATEMENT OF PAUL h'AIKOBO_KI •• w A E s o mp rkers ofloy year eewere s-end of affected. ce 1992, rtain the charitab The aggregat number le eorganizati asset of primary d oin sts, ributi in def oc nlu ined diof ngprivate benefit universi trplans tie usteed s, decreased pub sin lic gle-empl scho by ol oy s,56 er ,and _5 def plans ined Table 1 EMPLOYEE BENEHT RESEARCH INSTITUTE RESEARCH ASSOCIATE T-90 between contribution nonprofit 1985 hospitals, plans and 1989 was can ,similar with participate 28 to ,158 thatof inof these 403(b) single-employer plans plans having which, defined two similar to nine benefit to 401(k) active plans. plans participants Thirty-nine and 457(table plans,2). Summary of Private-Sector Qualified 401(k) Cash or Deferred Arrangement EMPLOYEE BENEFIT RESEARCH INSTITUTE Year DefinedBenefitPlans Defined Contribution PI0,n_ Pension Eligibility--Wage and Salary Workers Aged 25 and Over:. 1984, 1987, and 1991 percent of single-employer defined benefit plan assets were directly held in equity, while 31.6 allow employees to make pre-tax contributions. In 1991, 403(b) assets totaled $224.3 billion. 5 Trends, 1984-1989 Chart 1 SUMMARY BEFORE Cash THE Other SUBCOMMITI'EE Total ON SOCIAL SECUR Cash ITY Other Total • Between percent of1985 defined and contribution 1989, the number assetsofwere largedirectly defined held benefit in equity; plans remained 18.4 percent stable of ,defined and thebenefit Comparison of the Net Change In the Number of Primary Defined Benefit and Defined Year Equity WorkerBonds s items Percen COMMITFEE tag ae ssets 1984 aNu ssets m ON ber WAYS Equity 1985 Percentage ANDBo MEANS nds 1986items Numb ass er 1987 ets ass Pere ce ts ntag 1988 e 1989 Number number assets were of very directly largeheld plans in, bonds those with as opposed 10,000 or to 14.4 morepercent active participants of defined ,contribution increased slightly. assets; 7.4 • Workers without an employment-based plan (or with income below a threshold level) can save Contribution Plans Between 1985 and 1989 of Workers of Workers of Workers of Workers of Workers of Workers U.S. HOUSE OF REPRESENTATIVES • Projecting retirement income levels and their adequacy for today's workers is a complicated percent During this of defined period, benefit the number assets of were plans directly with 10 held ,000 intocash, 19,999 compared active participants with 13.1 percent increased of 7.6 for retirement on a tax-preferred Covered basisCovered through an Parti IRAc .ipating Self-employed Participating individuals Vested may establish Vested Plansa 17,303 29,869 37,420 45,054 68,121 83,301 ($ billions) SEPTEMBER 21, 1993 task. The number of workers covered, participating, and vested in employment-based defined percent contribution and the number assets; of plans 35.1 percent with 20, of 000 defined or more benefit participants assets were increased directly1.7held percent. in other The Keogh plans for themselves and their employees. Between 1985 and 1992, total assets held in Percentage of all private plans 3% 5% 5% 6% 9% 11% 1983 $212 $124 $40 $151 $526 $89 $63 $41 $94 $286 pension plans is at an historic high. In addition, today's workers have more tools at their number investmentof primary vehicles, defined as opposed benefit to 40.9 planspercent with 1,000 of defined to 2,499 contribution active participants assets (table decreased 6). 5.9 PercentageIRAs of all private and Keogh definedplans increased from $228 billion to $773 billion. 1984 202 136 46 150 535 101 70 46 105 322 I am disposal pleased to to appear save forbefore retirement you this on amorning tax-preferred to discbasis uss the than retire at m any ent time income in thesecurity past. Many of the baby cont_ plans 4% 6% 7% 8% 12% 14% percent, while the number of plans with 2,500 to 9,999 participants remained relatively constant 1985 248 159 56 181 643 126 72 54 140 392 1984 78,619 67.1% 52,727 55.1% 43,290 45.1% 35,479 20,000+ individuals are not taking advantage of these opportunities. Some inevitably will save more boom (table generation. 2). My name is Paul Yakoboski. I am a research associate at the Employee Benefit • Where worker choice is involved, individuals tend to prefer conservative investments. 1986 293 178 60 208 739 148 79 60 159 447 1987 83,962 66.4 55,738 52.7 44,297 44.8 37,604 (thousands) as they age, but others may face a financial problem when they retire. On the other hand, Research ConclusionInstitute (EBRI), a nonprofit, nonpartisan, public policy research organization based in 1987 According 289 to a171 recent sur63 vey by24 EBRI 7 and 770the Gallup 157 Organization, 78 63 69 percent 173 of individuals 471 1991 90,785 67.6 61,402 53.1 48,204 47.4 43,059 10,000-19,999 Active Participant there s b,c is uncertainty surrounding future 7,540 Social Security 10,339 benefit 11,559 levels and13,131 taxes, and also 15,451 17,337 Washington, 1988 323 DC. I176 am accompanied 72 286 by Celia 857 Silverman 168 , a research 80 analyst 75 at 199 EBRI. 522 preferred low-risk, low-return investments for their pension money, while only 25 percent • The number of primary defined contribution plans increased for all plan sizes, but particularly Measures of retirement income security are typically based on replacement ratios, the percentage of Percentage of all active private participants 19% 26% 28% 31% 37% d 1989 regarding 394 Medicare 195 and81 retiree340 health 1,01 care0 coverage 201 . Such92 issues, 87 combined 244 with 6uncertainty 23 preferred high-risk, high-return investments. Such preferences indicate a focus on principal for plans with fewer than 250 participants. The number of primary defined contribution plans Source: Unpublished final payta that bulations is receiv ofed thein Survey retiremen of Income t income. and Program However, Participation det.e .rmi _,,ning _ _ bywhat the U.S. replacement Departmentratiof o Commer will ce, Bureau 401(k) is primary plan d d d 3,419 d d 1990 362 202 76 325 965 173 96 83 231 584 regarding worker behavior in such areas as lump-sum distribution preservation, serve to EBRI has been 5,000-9,999 committed, since its founding in 1978, to the []accurate Defined statistical Contribution analysis of economic of the Census. increased retention as byop 233,271 posed plans to wealth , withaccumula 58 percent tion.of the Thistotal mayincrease be the result (135,058 of wo plans) rker in conce plans rns with two provide an adequate level of retirement income depends on many factors, particularly individuals' percentage of all active private participants d d d 8% d d 1991 477 230 90 411 1,208 Statement 239 117 108 316 780 make the modeling of future income levels difficult. security issues. Through our research, we strive to contribute to the formulation of effective and to rega nine rdingactive theirparticipants economic , secu and rity 88 in percent times of of the downsizing total increase and layoffs. was in plans Such with concefewer rns may thanlead 250 percentage needs and of all expec activeta private tions primary for their lifestyle in retirement relative to that of their final working years. 2,500-4,999 Table 2 1992 498 233 95 446 1,271 281 128 116 363 888 de responsible fined contrbution health, participants welfare, and retirement dpolicies. Consistent d with d our mission, 25% we do not d lobby or d m active workersparticipants. to focus on The principal number retention of primary in case defined the money contr []ibution is need Defined edplans in Benefit the with sho250 rt te to rm 2,499 rather than The fraction of preretirement income needed in retirement generally rises as pre-retirement income Q. w Primary Defined Benefit Plan and Active Participant Trends • Pension coverage rates and participation rates rose between 1987 and 1991 after falling advocate specific policy solutions. fo participants cusing on wealth increased accumulation by 1,901 plans for, reti and rement the number in the of long plans run.with To the 2,500 extent or more that participants this is the case, falls. However, it is best to first focus on real levels of consumption needed and desired in --_ 1,000-2,499 (percentage distribution) ($ millions) between 1984 and 1987. Vesting rates rose over the entire time period. The pension coverage 1= i increased t may prove by 88 difficul plans t to (table alter3). workers' investment decisions. retirement, as opposed to percentage relationships of retirement income to pre-retirement income, 1983 40.2% 23.5% 7.6% 28.7%100.0% 31.0% 22.1% 14.2% 32.7%100.0% m Assets $91,754 $143,939 $182,784 $215,477 $276,995 $357,015 rate went from 67.1 percent in 1984 down to 66.4 percent in 1987 and then rose to 67.6 percent Before the Primary Plan Active Participants when talking about what constitutes adequate retirement income, especially for lower income 1984 37.8 25.5 8.7 28.1 100.0 31.3 21.9 14.3 32.5 100.0 a. 500-999 Percentage of all private assets 9% 11% 13% 15% 18% 21% (thousands) in 1991. The participation rate went from 55.1 percent to 52.7 percent to 53.1 percent. In 1984, Much attention has recently been focused upon the retirement prospects of the baby boom •• There While sa isclittle rificing evidence some that long-term a "shift" invfrom estment defined return benefit s withto a defined conservative contribution strategy, plans indivhas iduals wo 1985 rke Q rs. 38.5 When evalua 24.8 ting 8.7 how well 28.1 individuals 100.0 are32 pr .2 eparing 18 , .3total13 weal .7 th 35 accumula .8 100 tion .0 through Percentage of all private defined > generation, 52.7 million specifically workersconcerning were covered whether by an they employment-based are adequately prepa planri , ng compared financially with for 55.their 7 may occurred. still earn Theanet competitive increase in rate primary of return. defined In acontribution particular large plans defined between contribution 1985 and 1989 plan, was the contribution all1986 available ass39.6 ets vehicles, 24.1including 8.1 indi 28.2 vidual 27% 100.0 savings as 33.1 34% well as17 emplo .737% ym 13.5 ent-based 35.7 41% reti100.0 rement 46%plans, 52% = 250-499 Percent Subcommittee on Social Security U retirement. should million be conside This in 1987 testimony red. and 61.4examines million workers the environment in 1991. The in which number current of workers workersparticipating prepare for rose 1987 annual 196,448 37.6 rate plans of 22.2 greater return from than 8.2 the 1983 32 net through .0decrease 100 the .0 in first primary 33.3 half ofdefined 1993 16.6onbenefit the 13.3 fixed plans 36.8 income across 100.0 guaranteed all plan sizes Distribution of < Committee on Ways and Means retirement from 43.3 by highligh millionting in 1984 trends to 44.3 in employment-based million in 1987 to 48 pension .2 million ($ millio coverage, in ns)1991. participation The percentage , andofvesting; 1988 investment 37.7 contract 20.5 (GIC) 8.4 fund33.4 was 9.1 100.0 percent. 32 While .2 approximately 15.2 14.4 6 percentage 38.1 100.0 points below (chart 1). While the number of small and mid-sized defined benefit plans has decreased, large Percentage Participants Net Percentage 100-249 exploring 1989 workers 39 trends .0vested in 19 defined .in 3 a pension 8 benefit .0 plan U.S. 33 and .6rose House defined 100 from .0 of cont 45.Representatives 1 ri 32 bution percent .2 14 plans (35 .7 .5 million by13 plan .9 workers) size; 39.2 discussing to 100 47.4 .0 percent worker the return in the plan's equity fund, it was still approximately 5 percentage points above the rate Contributions plans remain stable and very large $16,291 plans increased $24,322 slightly. $29,226 This indicates $33,185 that the growth $39,412 in$46,081 Projecting retirement income levels and their adequacy for today's workers is a complicated task. The Active Participants 1985 1989 Net change change 1985 1989 1989 change change (43.1 million) between 1984 and 1991 (table 1). 1990 37.5 20.9 7.9 33.7 100.0 29.6 16.5 14.2 39.6 100.0 preservation of lump-sum distributions; and examining the use of other retirement savings vehicles Percentage of ofinflation all private over contributions this time period, plus18% there was 26% essentially no 32% volatility in 36% the GIC fund's 43% rate of 44% defined contribution plans resulted from more than plan sponsors terminating defined benefit number of workers covered, participating, and vested in employment-based pension plans is at an 50-99 -""" 1991 39.5 19.0 7.5 34.0 100.0 30.6 15.0 13.9 40.5 100.0 Percentage of all private defined 2-9 available to workers 88,124 today.59:966 -28,158 -32.0% 353 246 0.9% -106 -30.1% return. The GIC fund's rate of return had a standard deviation of 0.6 percent over this period, plans and replacing them with defined contribution plans. historic high. In addition, today's workers have more tools at their disposal to save for retirement on contributbn contributions 38% 46% 50% 53% 60% 57% 1992 39.1 18.4 7.4 35.1 100.0 31.6 14.4 13.1 40.9 100.0 10-24 24,267 17,791 -6,476 -26.7 369 271 1.0 -98 -26.5 • While the number of primary defined benefit plans decreased during the 1980s, more than 75 compared with a standard deviation of 16 percent for the equity fund. For workers concerned a tax-preferred basis than at any time in the past. Many individuals are not taking advantage of these Hearing on 25-49 14,178 9,736 -4,442 -31.3 491 340 1.2 -151 -30.7 25-49 E percent of these plans were very small (two to nine active participants), and thus relatively about principal retention, GICs may be a rational investment. • Much of the growth in defined contribution plans has been through 401(k) plans. It is possible, opportunities. Some inevitably will save more as they age, but ($ others millions)may face a financial problem 50-99 11,303 9,013 -2,290 -20.3 808 645 2.4 -163 -20.2 Source: Employee Benefit Research Institute, Quarterly Pension Investment Report, fourth few workers were affected (table 2). Employment-based retirement plans present a significant opportunity for tens of millions of workers given the unique advantages of 401(k) plans and their rapid growth, that the creation of 401(k) 10-2, when they retire. On the other hand, there is uncertainty surrounding future Social Security benefit \ 100-249 9,534 7,109 -2,425 -25.4 1,498 1,135 4.2 -364 -24.3 Benefits $10,617 $16,399 $22,898 $22,215 $25,235 $30,875 quarter 1992 (Washington, DC: Employee Benefit Research Institute,1993). The Retirement Income Security of the Baby Boom Generation to accumulate assets for retirement. While the drop in pension coverage rates and participation rates • Investment plans causedallocation employers is athat mute otherwise issue if workers would not do have not preserve sponsored preretirement any pension lump-sum plan to establish a 250-499 4,670 4,022 -648 -13.9 1,651 1,430 5.2 -221 -13.4 levels and taxes, and also regarding Medicare and retiree health care coverage. Such issues, Percentage of all private benefits 13% 16% 18% 18% 21% 22% over the mid and latter 1980s has been well documented, it should also be noted that the number of • Between 1985 and 1989, the number of large defined benefit plans remained stable, and the 500-999 3,149 2,701 -448 -14.2 2,222 1,910 7.0 -312 -14.0 401(k) distributions plan. The fromnumber their plans. of 401(k) According plans rose to tabulations from 17,303 byinthe 1984 Internal to 83"301 Revenue in 1989 Service , and the (IRS) Percentage of all private defined combined with uncertainty regarding worker behavior in such areas as lump-sum distribution contribution benefits 33% 35% 37% 40% 42% 43% 1,000-2,499 number of very 2,360 large plans, 2,220 those -140 with 10,000 -5or .9 more 3,636 active participants 3,434 , increased 12.6 slightly -202 -5.6 workers covered and participating in an employment-based by pension plan continued to rise over this and number EBRI, oflump-sum active participants total distributions in these plans from grew retirement from 7programs .5 million to reached 17.3 million $125.8 over billion theinsame 1990 preservation, serve to make the modeling of future income levels difficult. I I I I I I I I 2,500-4,999 (table 2). 847 833 -14 -1.7 2,930 2,940 10.8 10 0.3 period. In addition, recent data indicate that the downward trends in coverage and participation (table time period 7). Twenty-nine (table 4). percent of those who received a lump-sum distribution in 1990 rolled over 5,000-9,999 455 450 -5 -1.1 3,141 3,153 11.6 12 0.4 Source: Employee Benefit Research Institute tabulations based on John A. Turner and Daniel J. Belier, rates -40,000 may be reversing. -20,000 Vesting 0 rates 20,000 have continued 40,000 to60,000 rise. 80,000 100,000 120,000 140,000 at least part of the distribution into an individual retirement account (IRA) (a total of 3.1 million Paul Yakoboski 10,000-19,999 198 213 15 7.6 2,749 2,956 10.8 206 7.5 eds., Trends in Pensions, Second edition (Washington, DC: U.S. Government Printing Office, Table 7 • The number of primary defined contribution plans increased for all plan sizes, but • IRA Many rollovers) 401(k) plan and participants 57 percent of also theparticipate amount distributed in a primary (a total defined of $71.4 benefit billion) plan.was According rolled over to 20,000 or more 175 178 3 1.7 8,985 8,792 32.3 -193 -2.1 1992); and unpulbished Department of Labor tabulations of 1989 Form 5500 annual reports filed Employee Benefit Research Institute Total Distributions from Tax Qualified Plans, 1987-1990 • with Pension particularly the Internal coverage Revenue for plans rates Ser ,with vic participation e. fewer thanrates 250 , participants and vesting (table rates all 3). rose between 1987 and 1991. None or nonereinto ported IRAs (table 10,280 8). If recipients 18,485 of 8distributions ,205 ,79.8 in particular current workers, are spending the EBRI tabulations of the Survey of Income and Program Participation, 56 percent of participants in Net Change in the Number of Plans Between 1985 and 1989 Total 169,540 132,717 -36,823 -21.7 28,834 27,252 100.0 -1,582 -5.5 aExcludes sing According le-participant topBureau lans. of the Census tabulations of the Survey in Income and Program funds on current consumption rather than rolling them into qualified retirement savings vehicles 401(k) plans also participate in a defined benefit plan. Distributions 1987 1988 1989 1990 bMay includesome employeeswho are eligibleto participatein the plan but have notelected to join. • While the net number of private defined benefit plans has declined and the net number of or Participa preserving tion (SIPP) them ,inthe some pension other coverage manner, rate it will 1 went affectfrom the number 67.1 percent of individuals in 1984 down who to will 66.4 have c401(k)Number padicipantsmay of Distributions participate in one or more additional (millions) plans. defined contribution plans has increased dramatically, there is little evidence that a shift from sufficient assets to retire in the lifestyle Washington, they desire and D.C. the number who are forced to remain in • Trends in defined contribution and defined benefit plans have been driven by the changing percent in 1987 and then rose to 67.6 percent in 1991. The participation rate 2 went from 55.1 Source: dDataEm notpav loyee ailabl Benefit e. Research Institutetabulations of 1985 and 1989 Form 5500 annual reports filed with the Internal Revenue defined benefit to defined contribution plans has occurred. Service. the work force longer than they desire. The recently enacted 20 percent withholding on lump- Source environment : Employee in Benefit which Research employersInstitute design tabulations retirement of plans. 1985Whether and 1989 intentionally Form 5500 or annual percent to 52.7 percent to 53.1 percent. In 1984, 52.7 million workers were covered by an Aggregate a 11.4 12.2 i 1.6 10.8 reports sum filed distrib with uti the ons Intern notaldirect Revenue ly tranService. sferred into a tax-qualified savings vehicle and the unintentionally, the government has profoundly influenced the relative attractiveness of defined employment-based plan, compared with 55.7 million in 1987 and 61.4 million workers in 1991. • Trends Non-IRA in defined /SEP bcontribution and8.8 defined benefit cplans have beenc driven by the changing 8.2 accompanying benefit and defined mandatory contribution provision plans of over a direct time. transfer The introduction option in theof Unemployment Section 401(k) in the Table 3 The number of workers participating rose from 43.3 million in 1984 to 44.3 million in 1987 to 48.2 21 September 1993 environment IRA/SEP in which employers 2.6 design retirement c plans. Whetherc intentionally or 2.6 Table5 Compensation Revenue Act ofAmendmen 1978 andtsthe of release 1992 of areproposed expected regulations to increase rollover in November activity 1981 and arguably thus Primary Defined Contribution Plan and Active Participant Trends million in 1991. The percentage of workers vested 3 in a pension plan rose from 45.1 percent unintentionally, the government has profoundly influenced the relative attractiveness of potentially increased the enhance popularity retirement of defined income contribution security for plans current by allowing workers. participants in profit-sharing FinancialAssetsof PrivateandGovernment PensionFunds,1983-1992 (35.5 million workers) to 47.4 percent (43.1 million) between 1984 and 1991 (table 1). There are Primary Plans Active Participants defined benefit and defined contribution plans over time. Total Amounts Distributed ($ billions) plans, savings plans, and employee stock owenership plans, but not defined benefit plans, to gaps in coverage and participation, especially notable among the young and those working for (thousands) Single Emoloy_r make electivepre-tax contributions. The Tax Reform Act of 1986 and the Omnibus Budget small employers. There is some evidence that as workers age, their participation in pension plans • Total private and public pension assets reached $4.4 trillion in 1992 (table 5) and thus Federal State and Indivi Reconciliation dua Aggregate ls have sign Act ificant of 1987 opportun included ities 80.3 provisions to save on that a8S.2 tax likely -preferre made d defined basis 115.3 onbenefit their own plans 125.8 forless retirement Active Participants tends to increase. 4 Percentage Defined Defined Multi- Private Government Local represent Non-IRA a /significant SEP store of wealth 65.9 to fund living c expenses in retirement. c Distribution 107.2 of through attractive either than employment-based defined contribution plans plans or IRAtoand many Keogh employers. accounts. Year benefit contribution employer insured Retirement Government Total IRA/SEP 14.4 c c 18.6 Net Percentage Participants Net Percentage 1985 1989 change change 1985 1989 1989 change change • Where worker choice is involved, individuals tend to prefer conservative investments. • There are growing opportunities for individuals to save on their own through salary reduction • Total private and public pension assets reached $4.4 trillion in 1992 and thus represent a While the net number of private defined benefit plans has declined and the net number of defined According to a recent survey by the Employee Benefit Research Institute (EBRI) and the arrangements, such as 401(k) plans ($, billions) either as the sole plan or as a supplemental plan. As Source: Employee Benefit Research Institute/Internal Revenue Service significant store of wealth to fund living expenses in retirement. Defined benefit and defined 2-9 199,704 334,762 135,058 67.6% 852 1,410 8.5% 558 65.5% contribution plans has increased dramatically, there is little evidence that the growth in defined Gallup Organization, 69 percent of individuals preferred low-risk, low-return investments for discussed above, the number of 401(k) participants more than doubled between 1984 and 1989. 10-24 tabulations contribution of IRS 70,424 assets Forms , including 107,113 1099-R public , Statement 36,689 and privatefor 52.1 pension Recipients 1,056 plans, of increased Total 1,637 Distributions over 180 9.8percent 581 55.0 contribution plans has been at the expense of defined benefit plans. Between 1985 and 1989, the 1983 $526 $286 $79 $252 $112 $311 $1,566 25-49 their pension 31,406 money, while 48,35 only 1 2516,945 percent preferred 54.0 high-risk 1,091, high-return 1,680 investments. 10.1 589 54.0 Assets in 401(k) plans amounted to $92 billion in 1984 and grew to $357 billion in 1989. Frombetween Profit-Sharing, 1983 and 1992. Retirement Private trusteed Plans, Individual pension assets Retirement grew from $892 Arrangements, billion in 1983 to $2.4 1984 number 535 of small and mid-sized 322 defined 81 benefit plans 291 declined, while 130 the number 357 of defined1.716 50-99 17,620 29,997 12,377 70.2 1,224 2,081 12.5 857 70.0 Insurance Contributions Contracts to ,401(k) Etc.plans , 1987-90. grew from $16 billion to $46 billion over this time period (table 4). trillion by the end of 1992. Private single-employer defined contribution funds held $286 billion 1985 643 392 121 347 149 405 2,057 contribution plans of all sizes increased. The number of very large defined benefit plans, those with 100-249 8,878 13,334 4,456 50.2 1,331 1,991 12.0 660 49.6 • Investment allocation is a mute issue if workers do not preserve preretirement lump-sum 1986 Individual 739 retirement 447 account 143 410 170 469 2,378 at year-end 1983, increasing to $891 billion at the end of 1992. Single-employer defined benefit 250-499 2,552 3,599 1,047 41.0 868 1,239 7.4 371 42.8 2,500 active participants or more, has remained stable. 1987 distributions 770 from471 their plans. According 148 to tabulations 459 by 188 the Internal Revenue 517 Service 2,553 • The federal government established the Thrift Savings Plan in 1987 for civilian employees. This plan assets increased from $526 billion in 1983 to $1.3 trillion as of year-end 1992. Multiemployer 500-999 1,185 1,675 490 41.4 808 1,151 6.9 343 42.4 Simplified employee pension 1988 857 522 170 516 208 606 2,879 (IRS) and EBRI, lump-sum total distributions from retirement programs reached $125.8 1,000-2,499 plan is similar to784 a private-sector 1,148 401(k)364 arrangement 46.4 in that 1,194 it allows 1,709 federal employees 10.3 to make 514 43.1 plan assets increased from $79 billion in 1983 to $260 billion by year-end 1992. Private insured Not available 1989 1010 623 200 572 229 735 3,369 • While the number of primary defined benefit plans decreased over the 1980s, more than 75 2,500-4,999 billion in 1990 (table 219 7). Twenty-nine 265 percent 46 of 21.0 those who752 received lump-sum 907 dis 5.t 4ributions 154 20.5 optional tax-deferred contributions to the plan. As of year-end 1992, assets in the thrift savings pension fund assets grew at an average annual rate of 13 percent from 1983 to 1991, increasing 1990 965 584 194 636 251 752 3,382 percent of these plans were very small (two to nine active participants), and thus relatively few 5,000-9,999 97 107 10 10.3 683 726 4.4 43 6.3 in 1990 rolled over at least part of the distribution into an individual retirement account (IRA) 1991 plan from 1,218 amounted $252 billion to to 7 $16.1 87$67billion. 8 billion.240 Federal government 678 retirement 276 assets grew 891 at an average 4,090 10,000-19,999 34 59 25 73.5 460 788 4.7 328 71.4 1992 1,276 891 260 n/a 304 988 4,396 (a total of 3.1 million IRA rollovers) and 57 percent of the amount distributed (a total of $71.4 annual rate of 12 percent, increasing from $112 billion in 1983 to $304 billion in 1992. State and 20,000 or more 29 36 7 24.1 1,100 1,329 8.0 229 20.8 billion) was rolled over into IRAs (table 8). • Em local plopension yees of state fund and assets loca grew l government at an annual or nongovernment rate of 14 percenttax-e from xempt 1983org to a 1992 nizati , o increasing ns can defer from None or none reported 13,082 38,839 25,757 196.9 (percentage of total pension Table assets) 8 Total $311 billion 346,014 to $988 billion 579,285 (table 5). 233,271 67.4 11,420 16,647 100.0 5,227 45.8 current compensation for retirement savings on a tax-preferred basis through Section 457 plans. 1Workers were asked if their employer or union had a retirement plan for any of its employees. A worker Rollover Contributions to IRAs, a 1987-1990 1983 33.6% 18.3% 5.0% 16.1% 7.2% 19.9% 100.0% A survey by the National Association of Government Deferred Compensation Administrators who answered yes was counted as covered by an employment-based plan. Source: Employee Benefit Research Institute tabulations of 1985 and 1989 Form 5500 annual reports filed with the Internal Revenue t 984 31.2 18.8 4.7 17.0 7.6 20.8 100.0 reported that 49 state and 52 local governments' 457 plans had assets of more than $15 billion as 2Covered workers were asked if they were included in the retirement plan. Workers who answered yes Service. 1985 31.3 19. t 5.9 16.9 7.2 19.7 100.0 Contributions 1987 1988 1989 1990 of year-end 1991. The same survey showed that participants contributed an average amount of How well defined contribution plans perform as retirement income producing vehicles will depend were counted as participating in an employment-based plan. 1986 31.1 18.8 6.0 17.2 7.2 19.7 100.0 Number $2,712 of in 1991. Contributions (millions) upon participant behavior, specifically worker decisions regarding participation, investment 1987 30.2 18.5 5.8 18.0 7.4 20.3 100.0 3Respondents reporting that they were plan participants were asked if they could eventually receive some 2.6 2.6 2.9 3.l 1988 29.8 18.1 5.9 17.9 7.2 21.1 100.0 allocation, and lump-sum distribution preservation. benefits from this plan upon reaching retirement age if they were to leave the present employer now or in 1989 30.0 18.5 5.9 17.0 6.8 21.8 100.0 the next few months. They were also asked if their retirement benefits from this plan could be received in a 1990 28.5 17.3 5.7 18.8 7.4 22.2 100.0 Total Amounts Contributed ($ billions) lump-sum payment. If they answer yes to either question, they were counted as vested. • Participation in 401(k) plans increased between 1983 and 1988. Of the 27.5 million workers 1991 29.8 19.2 5.9 16.6 6.7 21.8 100.0 Suit_ 600 39.3 45.9 63.0 71.4 4See offered Sylvestera J. 401(k) Schieber plan and inGordon 1988, 56.9 P. Goodfellow, percent participated, "Pension Coverage up from in 34.3 America: percent A Glass in 1983. Two-Thirds 1992 29.0 20.3 5.9 n/a 6.9 22.5 100.0 2121 K Street. NW The views expressed in this statement are solely those of the author and should not be attributed to the Full or One-Third Empty?" presented at U.S. Department of Labor Conference "Pension Coverage: Where 5Investment Company Institute, A Banner Year, 1992 Perspectiveon Mutual Fund Activity (Washington, DC: Washington. DC Source: Employee Employee Benefit Resear Benefit ch Institute Research , its officers, Institute trustees /Internal , sponsors,Revenue or other staff. Ser-,rice The Employee Benefit are We Going?", April 16, 1993. Investment Company Institute, 1992). 20037-1896 Research Institute is a nonprofit, nonpartisan, public policy research organization. Source: Employee Benefit Research Institute, Quarterly Pension Investment Report, first quarter 1993 tabulations of IRS Forms 5498, Individual Retirement Arrangement (Washington, DC: Employee Benefit Research Institute, 1993); Board of Governors of the Federal Reserve Information, 1987-90. 202-659-0670 System, Flow of Funds Accounts: Assets and Liabilities Outstanding First Quarter 1993 (Washington, DC: individual retirement account Fax 202-775-6312 Board of Governors of the Federal Reserve System, 1993). 5(I i (t2) (3) tax #_q3}lt,)7_3r}bl) 1