More Workers Joining Retirement Plans: EBRI

Surprisingly, those in the under-$5,000 bracket showed the most significant increase in participation. In 2003, 13% of those in this lowest income bracket were in a retirement plan, around the same as in 1998 but well up from only 4% in 1993.

Half of employers offered salary-reduction plans such as 401(k)s, EBRI found, up from 46% in 1998.

Employee participation in salary-reduction plans increased to 35% from 29% five years earlier.

For employees in defined-contribution plans, the average contribution in 2003 was 7.5% of pay, about the same as in 1998 but up from 6.6% in 1988.

Among industry groups, the public sector had the highest overall employee participation rate, at 74%, up from 71% in 1998. It was followed by mining, at 66%, up from 61%; manufacturing, 64%, up from 60%; and transportation, communications and utilities, at 59%, up from 56%.

The lowest participation rate was in retail trade, at 30%, up from 24%.

An aging workforce is one likely reason workers are increasingly moving into retirement plans, notes Copeland. "As workers get older, they are likelier to participate," he says.

A bigger reason, however, is competition among employers for good workers.

"The percentage of employers offering these benefits is up, because more workers are looking for these types of things," Copeland says.

An executive with a major retirement plan manufacturer says his company's sales data from more than 45,000 employer clients closely reflect EBRI's results.

The growth patterns for retirement plans are "reassuring but not surprising," says the executive, Chris Bowman, vice president of retirement and investor services for the Principal Financial Group, Des Moines, Iowa.

"A lot of people are getting closer to retirement," he says. "They're starting to get concerned about how much money they'll need."

The recent public debates over the future of Social Security also played a role, Bowman believes. And the industry itself has been a factor, he says, by developing new products that are more appealing to employers.

"We in the retirement industry have done a good job of bringing more and better and more efficient products to market to help employers want to sponsor such plans," he says.