The Private Pension Story
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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
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® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 201
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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® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 201
THE MOST COMMON
REQUEST WE GET:
GIVE ME ONE NUMBERFOR…..
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® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 2014
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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)
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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.
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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).
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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
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Source: Employee Benefit Research Institute estimates of the March 2014 Current Population Survey
(Traditional and New Income Measures).
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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
All 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
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).
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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
All 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
Traditional Measure New Measure
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Source: Employee Benefit Research Institute estimates of the March 2014 Current Population Survey(Traditional and New Income Measures).
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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%
All 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
Traditional Measure
New Measure
12
Source: Employee Benefit Research Institute estimates of the March 2014 Current Population Survey
(Traditional and New Income Measures).
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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?
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% 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.
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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.
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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
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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
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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
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• 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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® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 201
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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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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® Employee Benefit Research Institute 2015® Employee Benefit Research Institute 201
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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® Employee Benefit Research Institute 201529
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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® Employee Benefit Research Institute 201530
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
Baseline with universal IRA at 3 percent, 50% optout
Baseline with universal IRA at 3 percent, 75% 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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® Employee Benefit Research Institute 201531
OTHER ISSUES // COMMENTS // QUESTIONS
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