January 6, 1999 (The Editor’s Desk is updated each business day.)

Defined contribution retirement plans becoming more prevalent

In 1994-95, 66 percent of full-time employees participated in one or more employer-provided retirement plans. Although the participation rate was the same as in 1990-91, there was a shift in the type of plan: "defined contribution" retirement plans were on the verge of overtaking "defined benefit" pensions.

Participation in retirement plans, 1990-91 and 1994-95
[Chart data—TXT]

In 1994-95, 39 percent of full-time employees participated in "defined contribution" plans with employer contributions, up from 34 percent in 1990-91. In contrast, 42 percent of full-time employees participated in a "defined benefit" plans, down from 48 percent in 1990-91.

Savings and thrift plans are the most common form of defined contribution plan, with 24 percent of all full-time employees participating in 1994-95. In these plans, participants contribute a predetermined portion of earnings, all or part of which the employer matches. Other defined contribution plans are deferred profit sharing; employee stock ownership; and money purchase pension.

Data on retirement plans and other employee benefits are available from the BLS Employee Benefits Survey. Defined benefit pension plans provide employees with a fixed retirement payment using predetermined formulas. Defined contribution plans are accounts set up for each participant, to which the employer and often the employee make fixed contributions; the retirement payment is not fixed, but determined by these contributions. For additional information, see "Factors Affecting Employer-provided Retirement Benefits" (PDF 57K), Compensation and Working Conditions, Winter 1998.

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