Nearly Half of Marylanders Not Plan Participants

“Are Maryland Workers Ready for Retirement?,” a study by the Schwartz Center for Economic Policy Analysis (SCEPA), found that a big problem is the dip in employee sponsorship of retirement plans. Maryland employees’ access to employer-sponsored plans has fallen eight percentage points over the past 10 years, signifying an overall downward trend in retirement security for Maryland residents. As of 2010, only 59% of employed state residents, ages 25 to 64, worked for an employer that offered access to either a defined benefit or defined contribution plan.

Young employees, ages 25 to 44, suffered the largest drop in sponsorship (13%). The research suggests this downward trend will continue as this group ages. Among ethnic groups, Hispanic employees saw a 20% decline in sponsorship rates, more than double that experienced by white and black, non-Hispanic counterparts, both of whom had a 9% decline in sponsorship. Asian employees, however, saw an increase in plan sponsorship of 4%.

Sponsorship was found to vary across industries with the biggest decline in entertainment and recreation services, which showed a 26% decrease. In addition, those in the construction services saw a 25% decrease.

Decreasing sponsorship also varied by company size. Firms with 500 to 999 employees showed the biggest drop (16%). Small firms with fewer than 24 employees and those with 25 to 99 employees saw decreases of 12% and 10%, respectively. 

In reviewing the liquid assets of Marylanders, the study found 41% of near-retirement households have too little saved and will have to rely almost exclusively on Social Security or defined benefit pensions for their retirement income. Only 34% were found to have assets in excess of $300,000 and considered to have adequate income for retirement.

According to the study, the downward trend started in 2000, which suggests the declining figures are not a temporary result of the 2008-09 recession, but more a product of persistent structural trends.

Are there regulatory or other obligations that are causing employers to close or forego retirement plans? How can more small businesses be encouraged to sponsor plans? The report says more research is needed to answer these questions.

A copy of the report is here.