Retirement Plan Coverage by Firm Size : An Update

Previous research indicates that small businesses tend to be less likely than larger ones to offer retirement benefits to their employees. This means that resolving issues of adequate retirement savings requires an understanding of the role businesses play in retirement policy and how a business's decision on offering retirement benefits determines workers' choices regarding retirement savings. The relationship between firm size and retirement plan sponsorship is particularly important given the Obama administration's retirement proposals to create automatic individual retirement accounts. Obviously, accurate information is important for policymakers not only in formulating retirement income-security policies that would better target workers not covered by a retirement plan, but also to assess more fully the impact of policy alternatives on workers' retirement plan behavior.In this article, we build on our previous work and provide an update of the relationship between pension plan coverage and firm size among private-sector workers, using data from the Survey of Income and Program Participation (SIPP) for 3 years: 2006, 2009, and 2012. More specifically, we report on three important measures: the proportions of employers who offered a retirement plan, the proportions of employees who participated in a retirement plan, and the proportions of employees who took up a retirement plan conditional on their employers having offered one. Following previous work, our measures of pension coverage and participation take into account, and correct for, survey-response errors in the SIPP by using information in the W-2 records regarding tax-deferred earnings to defined contribution plans. Our findings show that compared with 2006, the offer and participation rates of any pension plan increased in 2009 and 2012; the differences were relatively small, but statistically significant. Although offer and participation rates differed substantially by firm size throughout the period, take-up rates (conditional on plans being offered) differed little among workers in firms with 10 or more employees