Access and Participation

About 50 percent of private-sector workers have access to a workplace-based retirement savings plan (see also Private Employer-Provided Retirement Plans). Employees of larger firms are much more likely than those in smaller firms to be offered a retirement savings plan. On the other hand, people from groups that are discriminated against are much less likely to work for an employer that sponsors a retirement plan. Small business and service employees, the self-employed, contingent workers, and those who work less than full time are among the least likely to be offered a retirement savings plan. The participation rate of workers in those plans also varies by demographic group and sector. Workers who are older and better paid are more likely to be plan members than are workers who are younger and earn a lower wage. Similarly, members of groups that are discriminated against are also less likely to participate unless the plan offers automatic features.

A variety of strategies exist for increasing access and participation. Some approaches focus on making it easier for employers to establish and administer plans. Other approaches require employers to offer a retirement plan. These include state-facilitated retirement savings programs, such as automatic individual retirement accounts. These programs offer simple low-cost accounts targeted to workers who typically do not have access to workplace options. If an employer does offer a plan, some features can significantly increase participation and the amount saved. These include automatically enrolling new workers and gradually increasing the percentage of earnings contributed.

It can be challenging for small employers to offer retirement savings plans to their workers. With relatively few staff and resources, there is likely no one who has the expertise and capacity to establish, administer, and maintain such plans. A multiple employer plan (MEP) is a 401(k)-type retirement savings plan that can be adopted by two or more employers. They allow small employers to offer this benefit at a lower cost and with fewer administrative and regulatory burdens than a single-employer 401(k) plan. Introduced under the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in 2019, pooled employer plans (PEP) are also a 401(k)-type retirement savings plan. These plans allow employers to pool resources in order to reduce costs associated with plan administration and investment fees. Access to retirement savings can then be expanded to all employees of participating employers. Unlike MEP plans, which typically allow small employers in the same industry or geographic region to provide a single retirement plan, PEPs allow employers across different industries to participate in the same pooled plan. Both MEPs and PEPs expand access to retirement savings programs for employees of small and mid-sized employers.