April 14, 1999 (The Editor’s Desk is updated each business day.)

Retirement costs share of compensation rises from 1966-98

In 1998, employer compensation costs for retirement benefits in the private sector accounted for 8.5 percent of total compensation, compared to 5.4 percent of total compensation in 1966. Most of the increase in the cost share occurred between 1966 and 1977. Retirement costs are the sum of employer payments towards company-provided retirement plans and Social Security.

[Chart data—TXT]

Social Security costs rose from 2.8 percent of total compensation in 1966 to 3.7 percent in 1977 and 4.8 percent in 1988, before edging down to 4.7 percent in 1998. Those cost changes can be linked to rises in Social Security tax rates and in the maximum level of earnings upon which the tax is imposed.

The share of employer costs for employee retirement plans changed from 2.6 percent of total compensation in 1966 to 4.3 percent in 1977, 3.3 percent in 1988, and 3.8 percent in 1998. In 1966, defined benefit retirement plans accounted for nearly all the costs for employer retirement plans. After the enactment of the Employee Retirement Income Security Act (ERISA) in 1974, the share of total compensation accounted for by defined contribution plans rose from 0.2 percent in 1977 to 0.5 percent in 1988 and to 1.4 percent in 1998.

These data are a product of the BLS Employment Cost Trends program. Additional information is available from "Tracking Changes in Benefits Costs" (PDF 46K), Compensation and Working Conditions, Spring 1999.