Other Free Encyclopedias » Medicine Encyclopedia » Aging Healthy - Part 3 » Plan Types Pensions and Policy Approaches - Coverage Under Private Pension Plans, A Shift To Defined Contribution Plans, Federal Regulation, Major Issues Facing The Pension System

Plan Types Pensions and Policy Approaches - Coverage Under Private Pension Plans

firms percent employees workers

The main expansion of today's pension system, in both union plans and nonunionized industries, began in the 1950s. The Korean War further stimulated the pension movement as employers once again competed for workers in the face of wage and salary controls and excess profits taxes. The growth in pensions continued in the 1960s. But much of the growth during that decade was due to expansion of employment in firms that already had pension plans as opposed to establishment of new plans. The percentage of the private workforce covered by any type of employer-sponsored retirement plan continued to increase until the late 1970s, but since then coverage has stagnated. In both 1979 and 1999, only 50 percent of nonagricultural wage and salary workers in the private sector between the ages of twenty-five and sixty-four were covered by a pension plan of any sort, even though 1979 was the end of a decade of stagnation and 1999 was the height of the longest expansion in the postwar period.

Pension coverage in the United States varies sharply by size of firm. In companies with one hundred or more employees, 70 to 80 percent of the full-time workforce is covered by a pension. The figure drops to 37 percent for firms with less than one hundred employees. Small employers frequently cite uncertainty about future earnings and the expense of employer contributions as important reasons for not providing pension coverage. Small employers also mention high employee turnover, the preference of their employees for cash wages, and administrative burden. The low levels of pension coverage in small firms is an important policy concern since almost 40 percent of full-time workers are employed in firms with fewer than one hundred workers. In an effort to make it easier for firms to establish and maintain plans for their employees, the federal government has passed several pieces of legislation over the years to ease financial and reporting requirements. Despite this legislation, the discrepancy in coverage between large and small firms remains.

Plan Types Pensions and Policy Approaches - A Shift To Defined Contribution Plans [next]

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