There is progress in expanding retirement plan coverage, but there still is work to be done. An expert panel recently highlighted some of the challenges to be met in building on that progress.

They offered their insights in a discussion that was part of the recent 16th annual National Institute on Retirement Security Retirement Policy Conference. Moderated by National Institute on Retirement Security Executive Director Dan Doonan, the panel included Lilach Frenkel, Director, Product Innovation, CAAT Pension Plan; Joelle Saad-Lessler, Industry Professor & Associate Dean of Undergraduate Studies in the School of Business at Stevens Institute of Technology; and John Scott, Retirement Savings Project Director, The Pew Charitable Trusts.

Access and Participation

“Access is the biggest barrier to having retirement security,” said Scott.

Just over 50% of employees are covered by retirement plans, said Saad-Lessler. While that is a majority, nonetheless she said, “that’s the problem” – it’s a slim majority, and the converse also is true — a sizable number also are not covered.

Saad-Lessler observed that a 2023 report by a SIPP panel said that as of December 2022, participation rates in various kinds of retirement plans are as follows:

• • defined benefit and cash balance plans: 17%
  • IRA/Keogh plan: 23%
  • 401(k)/403(b)/thrift savings plan: 51%

Industry sectors. The fact that there are different kinds of workers affects access to plans and the ability to save, Scott argued. Saad-Lessler also outlined findings from that study concerning the percentage of employers in particular industry sectors that sponsored retirement plans, as well as the percentage of employees who participated in those plans when they were offered.

The three sectors with the highest sponsorship rate were white collar, and a majority of the 10 industry sectors with the highest sponsorship rate were white collar as well.

Good news: More than half of the employers in 10 of the 15 sectors listed sponsored plans, and more than half of employees participated in plans when they were offered in 11 of the 15.

Small Employers

Challenges are more acute for smaller employers, Scott indicated. He remarked that instances of employers not offering a retirement plan “tend to be among smaller employers.” He added that one of the factors that has an especially pronounced effect on small employers are the fees associated with offering a plan.

Income and Net Worth Show the Importance of Participating

Individuals’ income and net worth show the positive effect of participation in retirement plans, and in dramatic fashion. Saad-Lessler observed that in a survey of respondents ages 21-64 with a job or business, with a sponsored plan and participating in one, the results were as follows:

Answers Afoot

There are factors with the potential to have a positive effect on retirement saving, panelists observed. Scott identified state programs and the Saver’s Match as factors that can help; he also suggested that artificial intelligence could reduce some of the administrative costs involved in running state programs.

And Frankel endorsed lifetime income as a tool to boost retirement saving. She asserted that the need for it “has never been higher.”

The Big Picture

Inadequacy of incomes and saving is “an issue that affects everybody” said Scott, summing up a basic message of the session. And he and Doonan struck a hopeful tone, too. Scott noted that “We are starting to see the net effect” of state auto-IRA programs, and Doonan remarked that “we’re seeing a little more progress” in making 401(k)s more responsive and more accessible.