In recent decades, defined benefit pension coverage has declined for private sector workers. This issue brief finds that funding volatility is the primary culprit, not pension costs. It also identifies opportunities to reverse the trend.
A wide body of research has focused on the numbers of companies trending away from pensions, yet substantially less attention has focused on the specific reasons why. In 2005 only 33% of private sector employees with workplace retirement plans had pensions, yet coverage was at 85% in 1975.
This research brief examines the root causes behind the trend and finds that:
Pensions are effective for employers and employees. Pensions offer employers a cost-efficient, useful workforce management tool for employee recruitment and retention. For employees, pensions help ensure adequate and predictable income in retirement.
Despite the advantages of pensions, private sector employers have been closing and freezing their pensions due to onerous laws and regulations enacted since the 1970s, including the Pension Protection Act of 2006. These rules created complicated funding rules, and increased contribution volatility when employers need steady, easy-to-estimate costs from year to year.
Private-sector industry shifts have seen fewer new industries offering pensions. For example, the number of domestic manufacturing jobs with long-tenured employees has declined, while there has been a growth in information technology companies that typically have employees with shorter average tenures.
The research brief also sets forth policy changes that could help reverse the trend of declining pension coverage for private sector workers. These include:
Changing pension law so that plan funding is less volatile.
Enabling employees to share the cost of pensions by allowing pre-tax contributions to the plan.
Designing pensions so that they are portable when an employee changes jobs.
Creating an avenue for third-party sponsorship of a pension plan.
Evolution and Growth: How Public Pension Plans Have Diversified Their Investments Amid Changing Markets
A report from the National Institute on Retirement Security (NIRS) and Aon examines the changes public pension plan investing has undergone throughout the twenty-first century.
Pensionomics 2025: Measuring the Economic Impact of Defined Benefit Pension Expenditures
Pensionomics 2025: Measuring the Economic Impact of Defined Benefit Pension Expenditures finds pending powered by U.S. private and public sector defined benefit pensions contributed significantly to the economy. In 2022, retiree spending of public and private sector pension benefits generated $1.5 trillion in total economic output, supporting 7.1 million jobs across the nation.
In partnership with AARP and NRTA, NIRS has developed a series of state-by-state infographic fact sheets regarding the public employee and teacher retirement systems across the country.
These fact sheets present a snapshot of these retirement systems along with key data from NIRS research and other sources.
What Do Americans Think About Pensions For Public Employees?
A research infographic from the National Institute on Retirement Security (NIRS) finds strong support among Americans for retirement benefits provided to state and local government employees. “What Do Americans Think About Pensions For Public Employees? finds 86 percent of Americans say all workers, not just those employed by state and local governments, should have a […]
