Over this same period, the percentage of all employers that offered only DC pension plans increased from 68 to 88 percent. The percentage of employers that offered only DB plans decreased from 24 to 9 percent, and the percentage that offered both DC and DB plans decreased from 8 to 3 percent. The increase in the percentage of employers offering only DC plans occurred across all industries. For the 6,974 of these employers that filed a Form 5500 report in 1992, the study found that 1,449 (or about 21 percent) of the employers had terminated their DB plans and adopted or retained DC plans. From 1984 to 1993, an increasing proportion of the employers with 2,500 or more employees offered both DC and DB plans. These results suggest that most private employers did not require employees to contribute to their DB plans. Furthermore, employers contributed proportionately more to DC plans that were designed to provide primary pension benefits than they did to DC plans that supplemented the benefits of a DB plan. Trends in Administrative Expenses for Private Pensions

In 1993, the average reported administrative expense per plan participant was $103 for employers that sponsored only DC plans and $157 for employers that sponsored only DB plans. From 1988 to 1993, the average reported administrative expense per participant remained fairly constant for both DC and DB plans.Consequently, growth in administrative expenses did not appear to explain why employers that already had a DB plan would shift to a DC plan. Possible Explanations of the Growth in DC Plans Provided by the Literature

The literature suggested various factors that may explain why employers might prefer to offer only DC plans to their employees. The objectives of our review were to determine how many private employers offered a retirement program consisting of (1) only defined contribution (DC) plans, (2) only defined benefit (DB) plans, or (3) a combination of the two types of plans; the average employer and employee contributions to the plans;the average administrative expenses charged to the plans; and the factors that may influence private sector employers when they decide to offer DC plans versus DB plans as a part of their employees’ retirement package. IRS Form 5500 Analysis Results

Table II.1: Number of Private Sector Employers, by Type of Pension Plan Offered (1984-1993)
Table II.2: Number of Participants Covered by Private Pension Plans, by Type of Plan Offered (1984-1993)
Table II.3: Number of Private Sector Employers, by Employer Size and Type of Pension Plan Offered (1984-1993)
Type of pension plan(s) offered (continued)
Type of pension plan(s) offered (continued)
Type of pension plan(s) offered (continued)
Table II.4: Number of Private Sector Employers, by Industry and Type of Pension Plan Offered (1984-1993)
Type of pension plan(s) offered (continued)
Type of pension plan(s) offered (continued)
Type of pension plan(s) offered (continued)
Type of plan(s) offered Note 1: This table includes only those employers that sponsored single-employer pension plans. Chang, A.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the: (1) numbers and types of pension plans sponsored nationwide by private employers from 1984 to 1993; (2) proportions of total contributions made to these plans by employers and employees; (3) average administrative expense for these plans; and (4) reasons employers sponsor certain types of pension plans.

What GAO Found

GAO found that: (1) using a computerized database of reports employers have filed with the Internal Revenue Service, GAO found that in 1993, 88 percent of private employers with single-employer pension plans sponsored only defined contribution (DC) plans; (2) this represented a sizable increase over 1984 when 68 percent of private employers reported they had only DC plans; (3) from 1984 to 1993, the percentage of employers that offered only defined benefit (DB) plans decreased from 24 to 9 percent, and those employers offering both DC and DB plans decreased from 8 to 3 percent; (4) the growth in DC plans occurred across all employer sizes and industries; however, the percentage of employers with 2,500 or more employees that sponsored both DC and DB plans increased over the same period and nearly half of these employers continued to sponsor a DB plan in 1993; (5) the data showed that private employers generally did not require employees to contribute to DB plans and that employers provided a greater proportion of total contributions to DC plans that were the only plan offered to employees compared with DC plans that supplemented a DB plan; and (6) from 1988 to 1993, administrative expenses remained fairly constant for DC and DB plans, and the average reported administrative expense per participant was lowest for employers that offered only DC plans. GAO also found that: (1) its review of retirement literature revealed a variety of possible explanations for why employers might prefer DC over DB plans if they decide to sponsor only one type of plan; (2) these factors included increasingly complex regulations for DB plans, a surge in the number of employers terminating DB plans to acquire capital assets, and employees' growing preference for pension benefits that they can retain when they change jobs; (3) the literature also noted that an employment shift has occurred away from industries in which employers traditionally favored DB plans toward industries in which employers favored DC plans; and (4) because the literature primarily addressed factors that influence private-sector decisionmaking on pension plan design, these factors may or may not be relevant to the federal government and other public employers.