Medical and Retirement Plan Coverage: Exploring the Decline in Recent Years: The Percent of Workers with Employer-Provided Medical Care and Retirement Benefits Declined over the Past Decade; a Variety of Potential Explanations Are Explored

Article excerpt

Between 1992-93 and 2003, the percentage of private sector workers participating in employer-provided medical care plans steadily declined. Medical care covered 63 percent of workers in 1992-93, compared with 45 percent in 2003. (1) There were less dramatic declines in retirement plan coverage; such plans covered 53 percent of workers in 1992-93, compared with 49 percent in 2003. These declines may be the result of shifts in the composition of the labor force, changes in employer decisions to offer coverage or employee decisions to choose coverage, or some combination of these and other factors. Using data from the Bureau of Labor Statistics National Compensation Survey, this analysis begins to quantify how some of these factors affect the overall decline in benefits coverage. This is just a first step, however; further analysis planned by BLS is identified at the end of this article. (See exhibit 1 for a discussion of benefit measurement issues.)

Medical care coverage declined for various populations within private industry. Among full-time workers, there was a 17-percentage point decline in medical care coverage over the decade, from 73 percent in 1993-94 to 56 percent in 2003. Part-time workers rarely have medical care coverage, thus there was little change in the percent of part-time workers covered. (See table 1.)

While overall retirement plan coverage declined only slightly over the decade, there was a continuation of the widely reported shift from defined benefit to defined contribution plans. (2) The percent of workers covered by defined benefit plans shows a clear decline--coverage among private industry workers declined by more than one-third over the decade. While such plans are more prevalent among larger employers, coverage has declined in both larger and smaller establishments. At the same time, there have been increases in defined contribution coverage. The net result has been a slight decline in the percent of workers with any retirement coverage as well as a slight decline in those covered by both a defined benefit and a defined contribution plan. The introduction of 401(k) plans in the 1980s led to a period of dual defined benefit and defined contribution plan coverage for many employees. (3) The decline in defined benefit coverage is having the effect of slowly eliminating the occurrence of dual coverage.

Much has been written on trends in employee benefit coverage, and on the data sources that are available to track these trends. Diane Herz, Joseph Meisenheimer, and Harriet Weinstein discuss the two basic sources of data used to measure benefits coverage--data from households and data from employers. (4) Data from households have the advantage of providing good detail on demographics, family income (beyond that from a single employer), and alternative sources of benefit coverage (such as spouse coverage for medical care). Data from employers provide more precise information on the type of plan and details on how the plan works. John Turner, Leslie Muller, and Satyendra Verma look further into definitions of plan participation for defined contribution plans. (5) This work considers a number of variables in arriving at plan participation numbers, including employer sponsorship, job coverage, eligibility, and current contributions. The authors provide a comprehensive analysis of the many alternative questions that need to be considered in counting covered workers. Beth Levin Crimmel analyzes data from the Medical Expenditure Panel Survey-Insurance Component on employer medical care offerings in 2001. (6) Finally, the Employee Benefit Research Institute regularly analyzes the latest benefits coverage data, and has conducted several recent examinations of alternative sources of benefits data. (7) Each of these sources provides background information on the many details involved in tracking benefits coverage.

Causes of declining benefits coverage

Changes in benefit coverage can be the result of many different factors:

* Legal changes, such as the introduction of 401(k) plans, can change the benefit packages available to employees or change the advantages employees can receive from those benefits. …