May 2013

The relationship between job characteristics and retirement savings in defined contribution plans

Pension trends in the United States, marked by the movement toward defined contribution (DC) plans, raise questions about the individual characteristics that influence retirement saving behavior. This study examines how DC participants’ industry and employer characteristics relate to the prevalence of reduced retirement account contributions in a time of severe recession (2007–2009). Data come from a restricted-use file that matches workers in the 2008 Survey of Income and Program Participation (SIPP) to their W-2 tax records received by the Social Security Administration. These data provide a unique opportunity to trace the longitudinal changes in DC retirement account contributions of a sample of private-sector workers who participated in a DC plan in 2007 and remained with the same employer throughout the recession. Multivariate probit models indicate several job-related factors as significantly related to the likelihood of reductions in contributions, including industry-specific employment losses, employer size, and reduced individual earnings. The results call attention to the potential role of employer and industry characteristics, as well as individual worker characteristics, in shaping retirement savings decisions.


The landscape of U.S. employer-sponsored pensions has undergone substantial changes over recent decades. These changes have been marked by the shift from traditional defined benefit (DB) plans to defined contribution (DC) plans.1 A central feature of most DC plans is that employees must take a more active role in their own retirement preparation: employees decide whether to participate, how much to contribute, how contributions will be invested, and whether to change these contributions and investments over time. Such decisions, in turn, can have considerable effects on an individual’s retirement resources.

In this article, we explore how the job characteristics of individuals who participate in DC plans are associated with longitudinal changes in their contribution levels, namely the probability of experiencing a substantial reduction in contribution levels during a time of severe recession (2007–2009). This focus, although narrowly defined, is interesting for several reasons. First, despite a variety of studies assessing the relationship between contribution behavior and individual and plan characteristics,2 there is surprisingly little information on how job characteristics relate to employee contributions. Most studies, moreover, do not focus on the same DC plan participant over multiple years. Existing studies also do not provide a basis for understanding of how job characteristics might help account for differences between DC participants who reduce their contributions over time, including during the recent recession, and those who do not.

The focus of this article also provides insights into how retirement savings behavior during the Great Recession related to an individual’s job characteristics.3 We know that aggregate retirement wealth fell sharply between 2007 and 2009.4 Much of this loss stemmed from a decline in stock prices, but unemployment and falling wages, among other factors, also may have led to reduced contributions to retirement accounts.5 No research has systematically examined how job characteristics potentially relate to this dynamic. For example, economic conditions may affect DC plan participants of particular industries or employer sizes differently. Perceptions of job security may vary by industry, and employer matches may differ between large and small employers.

Understanding contribution behavior is also important because contributions can affect an individual’s retirement security. In general, consistently contributing to a retirement account over one’s working life will increase retirement income security. However, a reduction in contributions, especially if it is long term, could have adverse implications for financial well-being during retirement.

We draw data from a unique, restricted-use file that matches a nationally representative sample of workers from the 2008 Survey of Income and Program Participation (SIPP) to their W-2 tax records received by the Social Security Administration (SSA). The SIPP data contain information on job characteristics around the beginning of the recession, and the administrative data provide longitudinal information on respondents’ actual DC plan contributions and earnings over the 2007–2009 period. Together, these data provide a unique opportunity to study participant-level changes in contribution levels over the financial crisis by job characteristics, controlling for observable differences across individuals.


1 See, for instance, Stephanie Costo, “Trends in retirement plan coverage over the last decade,” Monthly Labor Review, February 2006, pp. 58–64; Angela M. O’Rand and Kim M. Shuey, “Gender and the devolution of pension risks in the US,” Current Sociology, January 2007, pp. 287–304; and James Poterba, Steven Venti, and David A. Wise, “The changing landscape of pensions in the United States,” in Annamaria Lusardi, ed., Overcoming the saving slump: how to increase the effectiveness of financial education and saving programs (Chicago, IL: University of Chicago Press, 2009), pp. 17–46.

2 For example, Patrick Purcell, “Retirement plan participation and contributions: trends from 1998 to 2006,” Journal of Deferred Compensation 14, no. 4, 2009; Gur Huberman, Sheena S. Iyengar, and Wei Jiang, “Defined contribution pension plans: determinants of participation and contribution rates,” Journal of Financial Services Research, February 2007, pp. 1–32; Alicia H. Munnell, Annika Sundén, and Catherine Taylor, “What determines 401(k) participation and contributions?” Social Security Bulletin, vol. 64, no. 3, 2002, pp. 64–75; and Leslie Papke, “Choice and other determinants of employee contributions to defined contribution plans,” Social Security Bulletin, vol. 65, no. 2, August 2004, pp. 59–68.

3 According to the National Bureau of Economic Research, the recession began in December 2007 and continued through June 2009. Because of the breadth, depth, and length of the recession, it has been labeled the “Great Recession.” See Christopher J. Goodman and Steven M. Mance, “Employment loss and the 2007–09 recession: an overview,” Monthly Labor Review, April 2011, pp. 3–12.

4 For example, from the fourth quarter of 2007 through the second quarter of 2009, the combined value of assets in private-sector DB and DC plans fell from $6.4 trillion to $4.7 trillion, a 26-percent decline. By the end of the fourth quarter of 2011, the combined assets of private-sector DB and DC plans had risen in value to $6.1 trillion, still $311 billion less than their combined value at yearend 2007.  See Flow of funds accounts of the United States, flows and outstandings (fourth quarter 2008, 2009, and 2011, Board of Governors of the Federal Reserve System).

5 Barbara A. Butrica, Richard W. Johnson, and Karen E. Smith, “Potential impact of the Great Recession on future retirement incomes” in Raimond Maurer, Olivia S. Mitchell, and Mark J. Warshawsky, eds., Reshaping retirement security: lessons from the global financial crisis (Oxford: Oxford University Press, 2012), pp. 36–63; Alan L. Gustman, Thomas L. Steinmeier, and Nahid Tabatabai, “How did the recession of 2007–2009 affect the wealth and retirement of the near retirement age population in the health and retirement study?” (Cambridge, MA: National Bureau of Economic Research, working paper no. 17547, 2011); Richard W. Johnson, Mauricio Soto, and Sheila R. Zedlewski, “How is the economic turmoil affecting older Americans?” Fact Sheet on Retirement Policy (Washington, DC: Urban Institute, October 2008),; and Brooke Helppie McFall, “Crash and wait? The impact of the Great Recession on the retirement plans of older Americans,” American Economic Review Papers and Proceedings, May 2011, pp. 40–44.

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About the Author

Christopher R. Tamborini

Christopher R. Tamborini is a senior research analyst in the Office of Retirement Policy, Social Security Administration.

Patrick Purcell

Patrick Purcell is an economist in the Office of Research, Evaluation, & Statistics, Social Security Administration.

Howard M. Iams

Howard M. Iams is a senior research advisor in the Office of Research, Evaluation, & Statistics, Social Security Administration.