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Summary:
In order to help workers prepare for retirement, Congress has granted tax exemptions or deferrals for income set aside in pension plans and retirement savings accounts. Efforts to promote wider pension coverage by offering incentives to employers and employees through the tax code generally have been successful, especially for workers employed in medium and large firms. According to the Bureau of Labor Statistics, 79% of full-time employees in medium and large private establishments participated in an employer-sponsored pension or retirement savings plan in 1997. Pension participation in small businesses, however, has lagged behind the rates achieved in larger firms. In 1996, only 42% of full-time employees in businesses with fewer than 100 employees participated in an employer-sponsored pension or retirement savings plan. The low rates of sponsorship and participation in retirement plans among small businesses have prompted Congress to seek to reduce the number of obstacles that impede pension coverage in these firms. For example, Congress has authorized retirement plans for small employers with fewer reporting requirements and less stringent contribution rules than are imposed on larger employers. Evaluating the effect of these laws on pension coverage is complicated by the many other variables that affect a firm's decision to sponsor a retirement plan and a worker's decision to participate in the plan. Nevertheless, data on pension coverage collected in recent national surveys of employers and households can be used to establish a baseline against which future changes in coverage can be measured. Recent surveys of employers and households reveal that:
