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FAQs About Benefits—Retirement Issues
What are the trends in U.S. retirement plans?
Since 1979, significant changes have occurred in the kind of
employment-based retirement plan that workers participate in: Defined
benefit plans have declined, while defined contribution plans have
grown.
Note: There is an important distinction between Figures 1 and 2:
- Figure 1 shows the percentage of all private-sector wage and salary workers in
each type of retirement plan. For instance, Figure 1 shows that in
2011, 31 percent of all private-sector workers participated only in a defined contribution plan (DC) and 3 percent participated only in a defined benefit (DB) pension plan. (11 percent had both
a DC and a DB plan, and the residual percentage is the fraction of
private-sector wage and salary workers who were NOT a participant in an
employment-based retirement plan).
- Including those who participated in both a DB and DC plan, 42 percent of all private-sector wage and salary workers participated in a DC plan, and 14 percent participated in a DB plan.
- Figure 2 shows the distribution of retirement plan coverage among those wage and salary private-sector workers who have a retirement plan
(are a participant in a retirement plan). For instance, in 2011, 69
percent of private-sector wage and salary workers who are participants
in a retirement plan had only a defined contribution plan and 7% had only a defined benefit pension plan.
- Including those who participated in both
a DB and DC plan, 93 percent of these private-sector wage and salary
participants were in a defined contribution plan, and 31 percent were in
a DB plan.
- Including those who participated in both
a DB and DC plan, 93 percent of these private-sector wage and salary
participants were in a defined contribution plan, and 31 percent were in
a DB plan.
Note: Defined benefit pension plans include final average plans, cash balance plans, and other retirement plans that base their benefits on a formula, typically involving tenure and salary.
Defined contribution plans are individual account retirement plans
whose value is based on contributions (by the worker and/or employer),
and investment returns; the 401(k) is the primary example of a defined
contribution plan.
