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November 07, 2007
Retirement Plan Participation Drops Among Key Group

Participation in employment-based retirement plans fell from 55 percent in 2005 to 53 percent in 2006 among full-time, full-year wage and salary workers ages 21­64--those considered to have the closest connection with the workforce, according to a study by the Employee Benefit Research Institute (EBRI).

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In recent years, participation levels have tended to follow trends in the labor market, although the 2006 retirement plan participation decline occurred when the job market was stable.

While individual factors are important, the study said that retirement plan participation is "strongly tied" to macro factors, most importantly trends in the labor market. Retirement plan participation trends increased significantly when the labor market was tight in the late 1990s, and decreased when unemployment went up in 2001 and 2002.

With a more stable job market in 2003 and 2004, the participation trend flattened out. However, even with the stable job market in 2005 and 2006, the participation level declined, the study said.

"It appears a much tighter job market may be needed to push the trend upward," says Craig Copeland, EBRI senior research associate and author of the study. "However, if automatic enrollment in defined contribution plans is widely adopted, retirement plan participation levels could also reverse this downward trend."

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