The usage and cost of defined contribution plans (DC) like 401(k)s was recently published by the Bureau of Labor Statistics (BLS) highlighting their prevalence and differences by employee and plan type. Overall, 44% of private workers participate in a private DC plan with the average cost to a company at $.70/hour paid and $1.59/hour worked to employees
Overall participation in private DC plans was 44%, with 63% of those in management and professional jobs participating and just 19% in service jobs. In so called Savings and Thrift Plans which include 401ks, 74% of all workers participate where workers defer a set amount which may be matched by employers followed by 19% in Deferred Profit Sharing plans which does not require an employee contribution; 16% of workers participate in a Money Purchase plan followed by 4% in an ESOP and 3% in a SIMPLE for smaller businesses.
Companies made matching contribution to 62% of Savings and Thrift plans with half matching up to 6% and the rest divided between 3-4%. Roth 401k plans are offered in half of these plans.
The cost of defined contribution plans for workers and employers were higher for better paid occupations when calculating cost per hour led by professional and management jobs at $1.52/hour with service jobs at just $.15; the cost to higher paid workers was $2.41 compared to $.79 for service employees. Companies with 100 or more employees paid an average of $1.01 compared to $.45 for smaller enterprises. Geographical differences ranged from $1.75 in the West to $1.48 in the Midwest for workers.
The DC industry estimates that 60% of all full-time workers over the age of 21 have access to a retirement plan at work and 50% overall; the BLS study focuses on participation. The increased emphasis on providing retirement plans at work where people are 15 times more likely to save on their own has caused many states to require employers of a certain size to offer them.
