Since 1989, participation in DB retirement plans has fallen from about 60% of employees to about 20%, while DC plans have grown from about 55% of savers in employer-sponsored plans in 1989 to 80% today, according to the study. The decline in DB pension plan participation has been consistent across industries except public administration workers, who remain in pension plans at a higher rate than other workers because of the Federal Employees Retirement System, which offers both a DB and DC option to federal employees.
The report said DC plans have become the favored vehicle for retirement savings among employers because they transfer risk to the employee and tend to be less expensive to manage. Employer contributions are a fixed expenditure each payroll cycle rather than a payout that lasts for an unpredictable amount of time. In addition, government regulations enhanced tax incentives for DC plans while increasing the cost of administering DB plans.
“Even as DB pensions have decreased in prevalence over time, mean job tenure increased from 1989 to 2001 and remained relatively constant between 2004 and 2022,” said the report. “If pensions were a strong retention incentive for employees, one would expect a mirroring decline in job tenure. However, as evident from the recent Boeing and UAW strikes, pensions are still widely valued by workers.”