The Last Private Industry Pension Plans: A Visual Essay
Wiatrowski, William J., Monthly Labor Review
Having sufficient income during retirement years is a concern for many Americans. In years past, many employers provided a pension plan--formally a defined benefit plan--that ensured periodic payments for the life of the retiree and his or her spouse. Such plans are becoming rare for workers in private industry. In 2011, only 10 percent of all private sector establishments provided defined benefit plans, covering 18 percent of private industry employees. Decades ago, broad coverage of these plans allowed the Bureau of Labor Statistics (BLS) to analyze and tabulate considerable detail about how they worked. (1) Today, the declining number of plan participants limits such detail. This essay will explore the details of the last private industry pension plans.
Despite their decline within private industry, pension plans are still prevalent among government workers. BLS data show that 78 percent of state and local government workers had such coverage in 2011. Most federal government employees have defined benefit coverage as well. Within all levels of government, plans such as defined benefit plans have been the subject of recent debates because of budget constraints. Several states have reduced plan coverage or generosity; in other cases, states continue to discuss potential reductions. (2)
This visual essay focuses on what remains of defined benefit plans in private industry. In addition to the decline in coverage, recent trends among these plans reflect employer decisions to convert to cash balance plans or limit future accruals. Differences in coverage and provisions by various establishment and worker characteristics are considered; note that these characteristics are not independent. For example, observed differences by industry may be related to differences in occupation, union status, and other variables.
The charts and text on the pages that follow offer several perspectives: current plan features, changes to the data over time, and additional details about defined benefit plans. Terminology that is specific to defined benefit plans is defined as each chart is explained. (3)
All data presented here are from the BLS National Compensation Survey and predecessor surveys of the incidence and provisions of employee benefits over the past 30 years. The reference date of the most recent incidence data is 2011, whereas the reference date of certain detailed provision data is 2010. Information about the survey and additional data are available from BLS at http://www.bls.gov/ncs/ebs/. (4)
* BLS data on the incidence and provisions of employee benefits have been available for most years since the late 1970s, although the survey name and scope of workers covered have changed over time.
* The earliest data are limited to full-time employees in larger private establishments; these workers had extensive defined benefit pension plan coverage in the early 1980s.
* Surveys of smaller private establishments were added in 1990. Combining data from these surveys with those from larger private establishments yields estimates of pension coverage among all private employers, shown beginning in 1990.
* Beginning in 2000, one annual survey covered all private establishments, regardless of employment.
* Coverage among all private industry workers was 35 percent in the early 1990s; such coverage in 2011 stands at 18 percent.
* A relatively recent phenomenon among private industry employers still offering defined benefit plans is "frozen plans," which are closed to new employees. In addition, some such plans stop accruing benefits for current employees.
* BLS began capturing information on frozen deined benefit plans in 2009, when 1 in 5 participants was in a frozen plan. By 2011, that figure had increased to 1 in 4 participants.
* Because frozen plans are closed to new employees, as current employees retire or otherwise leave the plan and new employees are hired, the percentage of workers covered by these plans will decline over time. …