People are often grouped into two camps: optimists, who generally see the glass as half full; and those who are more pessimistic, who are said to view the glass as half empty.
One of the most commonly cited data points about retirement — and one that you hear people in Washington, DC repeat all the time — is that “only about half of working Americans are covered by a workplace retirement plan.” Drawn from the U.S. Census Bureau’s Current Population Survey (CPS), it’s cited by both those who see the current system as inadequate (or worse), as well as its most ardent champions — in other words, by both those who see the glass as half full and those who are inclined to see it as half empty.
The data point is the result of relatively simple math — the number of workers who say they participated in a workplace retirement plan divided by the number of workers. But when you take a closer look at the numbers, it’s not really that straightforward.
Consider that, according to that CPS data, in 2012, 80.5 million workers worked for an employer or union that did not sponsor a retirement plan. However, an EBRI analysis[1. See the November EBRI Issue Brief, “Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2012” here.] reveals that of the remaining wage and salary workers who worked for an employer that did not sponsor a plan:
• 8.9 million were self-employed, and thus ostensibly could have started a plan on their own without the action of an employer.
• 6.4 million were under age 21 — below ERISA’s minimum age coverage requirement.
• 4.3 million were over age 65 — and thus not required to be covered by a workplace retirement plan.
• 32.6 million were not full-time, full-year workers — also not required to be covered by a workplace retirement plan under ERISA.
• 17.0 million had annual earnings of less than $10,000.
Now, many of these workers fell into several of these categories simultaneously, such as being under age 21, having less than $10,000 in annual earnings, and not being full-time, full-year workers. So, as the EBRI analysis explains, once you apply certain common-sense filters for age, annual earnings, work status and/or employer size, you get a more realistic perspective.
If you consider the population of wage and salary workers ages 21-64 who work full-year, make $5,000 or more in annual earnings, and work for employers with 10 or more employees, then 32.5 million — or 36.4% of this population — worked for an employer that did not sponsor a retirement plan in 2012.
Said another way, nearly two-thirds of workers with those characteristics worked for an employer that did sponsor a retirement plan in 2012. Either way, the population of workers who don’t have access to a workplace retirement plan and who might reasonably be expected to participate is considerably different than the simplistic assessment offered by the commonly cited “less than half” data point.
Different people can look at the same data and draw different conclusions. Some are inclined to see the glass as half full, while others look at the same results and say it’s half empty. But, as plan advisors know, none of that matters if you’re looking at the wrong-sized glass.
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