Form 5500 and Participation

?I recently had a reporter ask about defined contribution plan participation. I directed her to the Form 5500 data, which is totaled and reported in the Department of Labor’s Private Pension Plan Bulletin series. Private-employer plan sponsors collectively reported on their Form 5500s for 2009 that there were 63,570,000 participants with “an account balance." The Department of Labor defines a participant with an account balance as any worker currently in employment (emphasis added) covered by a plan who is earning or retaining credited service under a plan. This category includes any individual who is eligible to elect to have the employer make payments to a Code section 401(k) plan. “Active participants” also include non-vested former employees who have not yet incurred a break in service.  

I pointed out that this does not include participation in most of the 403(b) and 457 plan universe (approximately 10 million), the Federal Thrift plan (3 million) and Simple IRA plans (3 million). However, no one reports DC plan participation at more than 75 million. Why not? There are different definitions of participation. Is it the DOL definition? Is it any active employee with an account balance? Is it any employee currently making voluntary contributions? There also is an unknown amount of double counting. In addition, most do not challenge survey data, which finds a substantially lower number. 

It is also interesting that the general reporting about DC plans continues to suggest a plateauing of plan participation. In this case the opposite is clearly true. According to the Form 5500 data listed below, between 2005 and 2009 there was a 17.8% increase in participation. Even if one feels the DOL definition of a participant is too broad, the growth is undeniable. I would add that the number of plans with 100 or more participants increased from 67,278 in 2005 to 75,485 in 2009. This is hardly a system in stasis. 

DC Participants With An Account Balance (DOL)

Year  Total

2005    53,967,000

2006    57,938,000

2007    58,953,000

2008    60,252,000

2009     63,570,000

I can understand the difficulty in determining the number of participants in employer-sponsored defined contribution plans. There are definitional issues and no reporting of any kind from a significant portion of the system. What I can’t understand is the reluctance to acknowledge that the system has continued to grow when the reported information so clearly confirms it.