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April 01, 2008
Size Top Factor in Retirement Plan Participation
A new study suggests that it is the size of the employer for whom an individual employee works for--not an employee's income--that is the top determining factor as to whether an employee participates in a retirement plan. It found that the larger the size of the employer, the greater the likelihood that an employee will participate in a company-sponsored plan.

An employee's income clearly does have an impact on participation, the Employee Benefits Research Institute (EBRI) explains in its "Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2006 Study, noting that "[t]he higher an individual's earnings were, the more likely he or she participated in a plan." EBRI notes that just 24.5 percent of full-time, full-year wage and salary workers ages 21-64 with earnings between $15,000 and $19,999 participated in a plan compared with 69.1 percent of those earning $50,000 or more.

However, employer size was an even more significant factor---just 28.6 percent of individuals working for an employer with 10-24 employees participated in an employer-sponsored plan, but this figure nearly doubled--to 51.4 percent--for individuals working for employers with 100-499 employees. Well over half (57.8 percent) of workers for employers of 500-999 employees and nearly two-thirds (65.6 percent) of workers for employers of 1,000 or more participate in a plan.

EBRI pointed out that employer size was a more influential factor than individual income, citing the following: "Even among workers making $50,000 or more, a considerable disparity exists [in terms of employer size]--25 percent of those working for the smallest employers participated in a plan, compared with 80 percent of those working for employers with 1,000 or more employees."

Other factors that had a significant impact on participation rates were race and marital status. Hispanics were much less likely to participate (30.6 percent among full-time, full-year wage and salary workers age 21-64) than whites (58.2 percent) or blacks (49.0 percent). Married individuals were much more likely (56.9 percent) to participate than those who were never married (41.6 percent).

Meanwhile, in terms of age, older individuals were more likely to be participating in a plan than younger workers--for example, 54.1 percent of those ages 45-54 participated versus 45.1 percent of those ages 25-34. Gender was not a significant factor determining participation, though, notably, the participation rate among full-time, full year wage and salary female workers (54.4 percent) was slightly higher than that of their male counterparts (51.4 percent).

Overall, participation among all full-time, full-year wage and salary workers ages 21­-64--those EBRI calls "those with the closest connection to the work force"--fell from 55 percent in 2005 to 53 percent in 2006.

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