Retirement Income Trends

Current Population Survey Estimates of Retirement Plan Participation Misleading...

… yet Estimates Among Demographic Cohorts Remain Useful

New research from the Employee Benefit Research Institute (EBRI) finds inconsistencies with other government data sources. Reprinted with permission. Read the full report here.

A new EBRI study takes a closer look at the estimates of employment-based retirement plans from the Current Population Survey (CPS) and finds that the levels and trends in retirement plan participation from the CPS remain inconsistent with other government data sources since the questionnaire redesign. However, the relative levels of participation across demographic cohorts that can be ascertained from the survey provide important information and are consistent both before after changes were done to the survey.

The EBRI Issue Brief, “Current Population Survey: Checking in on the Retirement Plan Participation and Retiree Income Estimates,” examines data contained in the latest Annual Social and Economic Supplement to the CPS, conducted by the U.S. Census Bureau, and compares findings with previous years. The CPS has traditionally been one of the most often used data for the sources of income for those who are near or at retirement age. The U.S. Census Bureau redesigned the CPS questionnaire in 2014 with several changes to its income questions. This was done in an attempt to capture more income that had been missing. The survey redesign resulted in lower retirement plan participation estimates — which some policy advocates have misinterpreted as actual changes in the employment-based retirement plan system.

Still, Craig Copeland, EBRI senior research associate and author of the study, points out, “While there have been concerns about the resulting estimates of employment-based retirement plan participation from the CPS since the questionnaire was redesigned in 2014, there is still useful information that can be found in relation to demographic characteristics. Nevertheless, more and improved data sources are needed to determine the income adequacy of retirees throughout retirement, which is a critical policy issue.”

Current Population Survey: Checking in on the Retirement Plan Participation and Retiree Income Estimates

The Annual Social and Economic Supplement to the Current Population Survey (CPS), conducted by the U.S. Census Bureau, has traditionally been one of the most often used data for the sources of income for those who are near or at retirement age. As described in previous Employee Benefit Research Institute (EBRI) publications, the U.S. Census Bureau redesigned the CPS questionnaire in 2014 with several changes to its income questions. This was done in an attempt to capture more income that it has been missing. The survey redesign resulted in lower retirement plan participation estimates — which some policy advocates have misinterpreted as actual changes in the employment-based retirement plan system.

This EBRI Issue Brief compares the 2017 results with the previous findings. Furthermore, it looks at the relative percentages of retirement plan participation among key demographic characteristics to see if they have held since the questionnaire redesign. In addition to the retirement plan participation estimates, changes in the sources of income for those ages 65 or older are examined. A comparison between the aggregate pension income found in the CPS and the aggregate pension income found in Internal Revenue Service (IRS) data is also discussed.

This study finds:

The Annual Social and Economic Supplement to the Current Population Survey (CPS), conducted by the U.S. Census Bureau, has traditionally been one of the most often used data for the sources of income for those who are near or at retirement age...

The overall percentage of workers participating in a retirement plan leveled off:
For the first time since the questionnaire was redesigned, a significant decline was not found for the retirement plan participation estimates from the year before. Full-time, full-year wage and salary workers ages 21–64 participating in an employment-based retirement plan held steady in 2017 at 41.4 percent compared with 41.0 percent in 2016. This was after a drop from 54.5 percent in 2013 before the questionnaire redesign.

The survey estimates do not conform to trends in another government survey:
Under the Bureau of Labor Statistics’ National Compensation Survey (NCS), the percentage of private-sector wage and salary workers at establishments with 500 or more employees participating in an employment-based retirement plan remained relatively flat between 2013 and 2017 at around 76 percent. In contrast, similar numbers from the CPS found that the percentage participating decreased from 64 percent in 2013 before the redesign to 47 percent in 2017. The flattening out in 2017 did nothing to lessen this discrepancy.

The ratio of participation within demographic groups remained the same after the redesign:
When comparing the participation levels within various demographic groups, the ratio of participation for various cohorts relative to the highest participation cohort remained nearly identical before and after the survey redesign. For example, the ratio of the participation level of workers ages 45–54 to that of workers ages 55–64 was 0.97 in 2011 and 0.98 in 2017.

The survey redesign did not fully capture retiree income:
Even after the redesign, the CPS total retirement income amounts for 2015 and 2016 were only 63.1 percent of the IRS’s 2015 reported amount and 65.4 percent of the 2016 level. However, this is up from 32.3 percent before the questionnaire redesign.

The estimates of employment-based retirement plan participation that resulted from the CPS questionnaire redesign persisted in the 2018 CPS, even though the downward trend in participation did level off. Given the issues with the data and the amount of income that is NOT being captured by CPS, improved data are called for to allow for a better understanding of what income retirees have and how they spend their income throughout their retirement. These two topics determine the income adequacy of retirees throughout retirement, which has become a critical policy issue.

 

To read more about the results from the CPS, including workers of Hispanic ethnicity appearing to have improved participation levels relative to other workers, see the full report.