Treasury
Inspector General for Tax Administration
Office of Audit
STATISTICAL TRENDS IN RETIREMENT
PLANS
Issued on August 9, 2010
Highlights
Highlights of Report
Number: 2010-10-097 to the Internal
Revenue Service Commissioner for the Tax
Exempt and Government Entities Division.
IMPACT ON TAXPAYERS
American workers face a number
of risks in both accumulating and preserving retirement benefits. While the number of individuals participating
in and the amount invested in employer-sponsored retirement plans has increased
substantially over the last 30 years, retirees may not have enough income from
retirement plans alone to cover their financial needs during retirement. More individuals are also withdrawing
retirement savings before retirement.
With longer life expectancy, both taxpayers’ investment decisions (including
retirement plan investments) and changes in the economy will continue to play
important roles in ensuring a financially secure retirement.
WHY TIGTA DID THE AUDIT
The overall objective of this
review was to identify retirement plan trends based on a wide range of
statistical indicators. The data cover
the vast majority of employer-sponsored retirement plans, but may not include
some retirement plans for churches, government agencies, and some smaller
employers. This audit was conducted as
part of the TIGTA Fiscal Year 2010 Annual Audit Plan and addresses the major
management challenge of Tax Compliance Initiatives.
WHAT
TIGTA FOUND
From Calendar Years 1977 to 2007,
the number of options available for workers to save for retirement through
employer-sponsored and individual retirement plans steadily increased. In addition, while there is no conclusive
data to show the exact number of American workers who are saving for
retirement, it is clear that a higher percentage of American workers are
participating in employer-sponsored retirement plans. Participation has doubled in the last three decades
and has significantly outpaced population growth among working age Americans. For example, from July 1977 to
July 2007, the working age population (i.e., people between the age
of 18 and 64 years) grew 44.8 percent; however, employer‑sponsored
retirement plan participation increased 102.1 percent between Calendar
Years 1977 and 2007. Also, the type of
retirement plans being offered has changed drastically from those where the
benefits are based on earnings and years of service to plans where benefits are
based on employee contributions, any employer contributions, and investment
earnings and declines.
Between Calendar Years 1977 and 2007, the value of
retirement plan assets grew substantially.
This is good news, as the increased value of plan assets generally
equates to additional income upon retirement.
However, it is also clear that many retirees will continue to rely on
Social Security and other forms of income for retirement and may run the risk
of outliving their retirement assets. In
addition, more individuals are withdrawing retirement savings before retirement,
which reduces the amount of income available for future retirement.
While this
report provides some positive trends and some concerning trends, much of what is
presented may change substantially as data become available for Calendar Years 2008,
2009, and 2010 when the country experienced a significant economic downturn and
the beginnings of a recovery. In
addition, legislative changes being considered could increase participation in
retirement plans and provide incentives for younger workers to participate in
the future.
WHAT TIGTA RECOMMENDED
TIGTA
made no recommendations in this report.
Tax Exempt and Government Entities Division management reviewed the
report before it was issued and offered clarifying comments.
READ THE
FULL REPORT
To view the report, including
the scope and methodology, go to:
http://www.treas.gov/tigta/auditreports/2010reports/201010097fr.html.
Email Address: inquiries@tigta.treas.gov
Phone Number: 202-622-6500
Web Site:
http://www.tigta.gov