Number: RL34213
Title: Retirement Savings Accounts: Fees, Expenses, and Account Balances
Authors: Patrick Purcell, Domestic Social Policy Division 
Abstract: According to the U.S. Department of Labor, 51% of all private-sector employees in the United States participated in employer-sponsored retirement plans in March 2007. An estimated 43% of private-sector employees participated in defined contribution plans, while just 20% participated in defined benefit plans. Defined contribution plans, such as those authorized under §401(k) of the Internal Revenue Code (I.R.C.), are much like savings accounts maintained by an employer on behalf of each participating employee. The employer and/or employee contribute to an account, which is usually invested in stocks and bonds. When the worker retires, he or she receives the balance in the account - the sum of all past contributions plus interest, dividends, and capital gains (or losses) - as a lump sum or in a series of payments. In a defined benefit plan, the participant earns a benefit that is typically based on length of service and final pay or average pay. The employer is responsible for funding a defined benefit plan and must ensure that the plan has sufficient assets to pay the benefits that have been earned by the plan's participants.
Pages: 15
Date: October 17, 2007