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® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 2011

The Private Pension Story

Dallas Salisbury Employee Benefit Research Institute

[email protected] 202-775-6322

A non-profit, non-advocacy, fact tank

mailto:[email protected]:[email protected]


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Background and Caveats

• The Employee Benefit Research Institute is a nonprofit, nonpartisan,education and research organization established in Washington, DC,in 1978.

• EBRI is a fact tank that does not take pro or con policy positions, nor

does it lobby, or make specific policy recommendations.• The views expressed in this presentation are solely those of Dallas

Salisbury and should not be attributed to the Employee BenefitResearch Institute (EBRI), the EBRI Education and Research Fund,any of its programs, officers, trustees, sponsors, or other staff.

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THE MOST COMMON

REQUEST WE GET:

GIVE ME ONE NUMBERFOR…..

3


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The large majority say the benefits package is an

important factor in their decision to accept a job

When choosing a job, how important are the benefits that a potential employer offers in your decision to accept or

reject the job? (2014 n=1,517)

33%

45%

18%

2% 1%

32%

44%

19%

4%1%

Extremely important Very important Somewhat

important

Not too important Not at all important

2013 2014

5Source: Employee Benefit Research Institute and Greenwald & Associates, 2013-2014 Health and Voluntary Workplace BenefitsSurveys.


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29%

25% 25%

21%

1999 2001 2013 2014

2 in 10 employees report having accepted or left jobs

because of the benefits package offered

Have you ever accepted, quit, or changed jobs because of the benefits, other than salary or wage level, that an

employer offered or failed to offer? (2014 n=1,517)

6

Percentage Yes

Source: Employee Benefit Research Institute, 1999 and 2001 Value of Benefits Surveys; Employee Benefit Research Institute and

Greenwald & Associates, 2013-2014 Health and Voluntary Workplace Benefits Surveys.


7/32® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 201

Macro: Retirement Assets (Trillions of Dollars)

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97.0% 97.0% 93.5% 93.1%

71.9%68.4%

45.7%41.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Traditional New Traditional New Traditional New Traditional New

1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

Social Security Company State Federal IRA, 401(k) Annuities Other

Distribution of Retirement Income Plus Social Security Income, by Income Quartile and Source of

Retirement Income, Traditional and New Measures of Income in the Current Population Survey,

Individuals Ages 65 or Older, 2013

Source: Employee Benefit Research Institute estimates of the March 2014 Current Population Survey

(Traditional and New Income Measures).



Percentage of Individuals Age 65 or Older With Income Who Have More

Than 90% of Their Total Income From Social Security Under the

Traditional and New Measures of Income in the Current Population

Survey, by Income Quartile, 2013

36.4%

71.0%

60.7%

13.5%

0.5%

35.7%

68.3%

61.4%

11.9%

1.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

All 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

Traditional Measure

New Measure

9





Aggregate Retirement Income* for Individuals Ages 65 or Older Under theTraditional and New Measures of Income in the Current Population Survey,

by Income Quartile, 2013(in billions of dollars)

$253.57

$2.32$10.07

$63.22

$177.96

$324.42

$2.29$11.08

$74.91

$236.14

$0

$50

$100

$150

$200

$250

$300

$350


Traditional Measure

New Measure

10

*Retirement Income includes pension income from public and private sector employers, draws from IRAs and 401 (k)

type plans, annuities and paid up life insurance, and other income for retirement.Source: Employee Benefit Research Institute estimates of the March 2014 Current Population Survey(Traditional and New Income Measures).



Aggregate IRA, DC Income for Individuals Ages 65 or Older Under theTraditional and New Measures of Income in the Current Population Survey,

by Income Quartile, 2013(in billions of dollars)

$14.08

$0.15 $0.21$1.42

$12.30

$49.56

$0.58$2.18

$12.12

$34.67

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00


Traditional Measure New Measure

11

Source: Employee Benefit Research Institute estimates of the March 2014 Current Population Survey(Traditional and New Income Measures).



Percentage of Individuals Age 65 or Older With IRA, DC Income Under the

Traditional and New Measures of Income in the Current Population

Survey, by Income Quartile, 2013

1.7%

0.4% 0.5%

1.7%

4.0%

10.3%

2.1%

6.2%

15.1%

17.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


Traditional Measure

New Measure

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WHAT DOES THE VOLUNTARYSYSTEM LOOK LIKE BEFORE

ERISA, THEN, NOW, AND IN

BETWEEN

IS THE V.S. MORE SUCCESSFUL

TODAY THAN IN 1975?

13



% Sponsorship, Participation and Vesting

1940 ‒ 2012

0

10

20

30

40

50

60

70

1940 1950 1960 1970 1974 1979 1988 1998 2009 2012

Sponsorship Participation % Vested %

16

U.S. Bureau of the Census, various datasets, 1940‒2013.



18



Percentage of Various Work Forces Who Participatedin an Employment-Based Retirement Plan, 1987 –2011

37.6%39.0% 39.0%

41.0%

43.6%44.4%

42.0%40.9% 41.5% 40.4%

39.6% 39.8%

39.7%

46.1%47.4%

46.2%47.8%

51.0% 51.6%

48.4%47.0% 47.4%

46.0%44.8% 44.9% 44.6%

58.4% 59.5%

57.7% 57.9%

60.3% 59.8%

57.1%

54.8% 55.3% 54.8%54.4%

54.5%53.7%

39.8%41.3%

40.1%42.2%

46.1% 46.7%

43.2%41.7% 42.0%

40.7%

39.2% 39.5%

39.2%

75.6% 76.1%74.5%

76.7% 77.2% 77.3% 75.8%74.8% 75.4% 74.5%

72.9% 71.9% 73.2%

35%

40%

45%

50%

55%

60%

65%

70%

75%

80%

1987 1990 1993 1995 1998 2000 2003 2005 2007 2008 2009 2010 2011

All Workers All Wage and Salary Workers Ages 21 –64

Full-Time, Full-Year Wage and Salary Workers Ages 21 –64 Private-Sector Wage and Salary Workers Ages 21 –64

Public-Sector Wage and Salary Workers Ages 21 –64

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Source: Employee Benefit Research Institute estimates from the 1988 –2012 March Current Population Surveys.



Median IRA Account Balances, Full Samples, by IRA Type, 2010-2013

$ 2 5 ,

2 9 6 $

3 2 ,

6 4 7

$ 1 1 ,

4 7 1

$ 1 5 ,

4 7 1

$ 2 3 ,

7 8 5

$ 2 8 ,

4 5 7

$ 1 1 ,

3 4 4

$ 1 5 ,

7 1 1

$ 2 7 ,

9 8 7

$ 3 5 , 8

0 3

$ 1 2 ,

7 9 6

$ 1 7 , 7

9 4

$ 3 2 ,

1 7 9 $ 4

0 ,

9 9 6

$ 1 5 ,

1 9 0

$ 2 0 ,

2 5 7

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

All Traditional Roth SEP/SIMPLE

2010 2011 2012 2013Source: EBRI IRA Database.

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401(k) Account Balances Increase With Participant Age

and Tenure

Average 401(k) account balance, by age and tenure, 2013

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

20s 30s 40s 50s 60s

0 –2

>2 –5>5 –10

>10 –20

>20 –30

>30

21

Source: VanDerhei, J. , Holden, S., Alonso, L., Bass, S., Pino, A. (December

2014). “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in2013” December 2014, EBRI Issue Brief

http://www.google.com/url?q=http://www.ebri.org/publications/ib/index.cfm?fa%3DibDisp%26content_id%3D5472&sa=D&sntz=1&usg=AFQjCNE2YU88QsHSt6U1ZenmcRaTEUIqtQhttp://www.google.com/url?q=http://www.ebri.org/publications/ib/index.cfm?fa%3DibDisp%26content_id%3D5472&sa=D&sntz=1&usg=AFQjCNE2YU88QsHSt6U1ZenmcRaTEUIqtQhttp://www.google.com/url?q=http://www.ebri.org/publications/ib/index.cfm?fa%3DibDisp%26content_id%3D5472&sa=D&sntz=1&usg=AFQjCNE2YU88QsHSt6U1ZenmcRaTEUIqtQhttp://www.google.com/url?q=http://www.ebri.org/publications/ib/index.cfm?fa%3DibDisp%26content_id%3D5472&sa=D&sntz=1&usg=AFQjCNE2YU88QsHSt6U1ZenmcRaTEUIqtQ



Quintiles of 2010 year end combined 401(k) and IRAbalances for ages 60-65 by tenure category (for 401(k)participants with at least one IRA)

p20 p40 p60 p8010-20 $46,831 $111,094 $206,883 $370,688

20-30 $77,049 $180,400 $318,403 $533,853

>30 $121,739 $260,186 $437,827 $735,813

$-

$100,000

$200,000

$300,000 $400,000

$500,000

$600,000

$700,000

$800,000

22


23/32© Employee Benefit Research Institute 2015

• New Retirement Data Warehouse:o Flexibility, efficiency & growth: data types, sources, formats

• DC Retirement Plan / IRA Databases:o EOY 2000 401k:

35K plans, 11.8mm participants, $580 billion in assets

o EOY 2013 401k:

73k plans, 26.4mm participants, $1.9 trillion in assets

o EOY 2013 DC estimate: 91k plans, 36mm participants, $2.3 trillion in assets *

o EOY 2013 IRA:

20.7mm individuals, 26mm accounts, $2.5 trillion in assets

o EOY 2013 Total Retirement Database:

56.7mm individuals, $4.8 trillion in assets, 26mm ira

accounts, 91k DC plans

* includes inactive accounts

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2014 Baseline Retirement Readiness Ratings from Ages 35-64:

With and Without Long-Term Care Costs

35-39 40-44 45-49 50-54 55-59 60-64

Including LTC costs 56.7% 58.8% 58.9% 58.6% 57.0% 56.5%

Assuming no LTC costs 79.6% 79.3% 76.6% 75.2% 72.7% 72.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

24

Source: EBRI Retirement Security Projection Model®Versions 2103a and 2163a.


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Percentage of all* Boomer and Gen X households with“adequate” retirement income depends on assumptions re

who is responsible for long-term care costs

EarlyBoomers

LateBoomers

Gen Xers

Without LTC 71.9% 75.6% 79.0%

With LTC 56.7% 57.7% 58.5%

0.0%

20.0%

40.0%60.0%

80.0%

100.0%Percentage ofSimulated

Life-PathsThatWill Not Run

Short ofMoney

in Retirement

2014 Retirement Readiness Ratings With andWithout Nursing Home and Home Health Costs, by

Age Cohort

25

Source: Jack VanDerhei, Why Does Retirement Readiness Vary: Results

from EBRI’s 2014 Retirement Security Projection Model®, The Journal ofRetirement (April 2014)

*NB: This includes all households regardless of eligibility for employer-sponsored retirement plans. Seesubsequent slides for the impact of plan eligibility on retirement income adequacy.


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® Employee Benefit Research Institute 201526


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35-39 40-44 45-49 50-54 55-59 60-64

6 percent contribution 17.9% 17.7% 15.1% 9.8% 6.2% 3.8%3 percent contribution 10.6% 9.9% 7.9% 5.1% 3.1% 1.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Reduction in Average Retirement Savings Shortfalls by Agefrom Introducing Automatic IRAs: 3 vs. 6 Percent of

CompensationAssumes No Opt-out and 100 Percent Autocorrelation for

Employer Size

Source: EBRI Retirement Security Projection Model,® version 2258.Note: Husband's Employer Size is Used to Categorize Employer Size for Married HH


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Impact of Leakages for Automatic Enrollment PlansAssuming No Participant Behavior Change for Participation,

Contribution or Asset Allocation

Lowestincomequartile

Secondincomequartile

Thirdincomequartile

Highestincomequartile

Loan Defaults 4.2% 3.3% 4.0% 3.2%

Hardship WD w 6 mosuspension

8.0% 6.7% 4.3% 3.2%

Cashouts 20.0% 15.9% 12.7% 10.3%

All 27.3% 22.7% 18.3% 15.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%Percentage of

those notreaching the

thresholdreplacement ratewhen leakages

exist who wouldreach an 80percent real

replacement rateif the leakageswere removed

28

Source: Jack VanDerhei, "The Impact of Leakages on 401(k)

Accumulations at Retirement Age" Testimony for the ERISA AdvisoryCommittee, June 17, 2014.

• The population simulated

consists of workers currentlyages 25 –29 who will havemore than 30 years ofsimulated eligibility forparticipation in a 401(k) plan.

• Workers are assumed toretire at age 65 and all 401(k)balances are converted into areal annuity at an annuitypurchase price of 18.62.

• Plans are assumed to haveautomatic escalation with a 1percent of annualcompensation increase and 3percent default contributionrates.

• Employees are assumed torevert their level ofcontributions to the default

rate when they participate ina new plan and opt-out ofautomatic escalation inaccordance with theprobabilities in VanDerhei(September 2007)


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Lowest-Income Quartile Second Third Highest-Income Quartile

Social Security Benefits Reduced 10.3% 45.5% 64.3% 79.6%

No Social Security Reduction 20.9% 53.5% 70.1% 83.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Percentage of SimulatedLife-Paths That

WillNot

RunShort of Moneyin Retirement

Financial distress of Social SecurityImpact of Pro-Rata Reductions in Social Security Retirement Benefits

(Starting in 2033) for Gen Xers on 2014 Retirement Readiness Ratings,TM

by Preretirement Wage Quartile

Source: EBRI Retirement Security Projection Model® Versions 1995 and 1997.Note: The values in this figure represent the percentages of simulated life-paths that will not run short of money in retirement assuming that 100 percentof simulated retirement expenses are paid. Additional information on the percentages that would be able to satisfy less stringent thresholds (viz., 80 and90 percent of simulated expenses) is provided in Appendix B.

Source: Jack VanDerhei, Why Does Retirement Readiness Vary: Results

from EBRI’s 2014 Retirement Security Projection Model®, The Journal ofRetirement (April 2014)


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4.13

3.86

3.64

3.93

4.00

4.06

Baseline

Baseline with universal IRA at 3 percent, no optout

Baseline with universal IRA at 6 percent , no optout

Baseline with universal IRA at 3 percent, 25% optout



2014 Retirement Savings Shortfalls* by Scenario (includes LTCCosts)

Trillions of 2014 Dollars

Source: EBRI Retirement Security Projection Model,® version 2258.*Retirement Savings Shortfalls represent the present value (at age 65) of all simulated deficits in retirement for households where thehead of household is 35-64.


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OTHER ISSUES // COMMENTS // QUESTIONS


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