Contributions to defined-contribution plans will nearly double in the next five years, according to TowerGroup.
Participant contributions in the plans will increase to $204 billion in 2011 from $103 billion at the end of this year, the independent research company, which is owned by MasterCard International, said in a report released Tuesday.
At the same time, traditional pension plans will continue to decline, the report said. By 2011, only 11% of U.S. employees will have defined-benefit plans as their sole company-sponsored retirement option, TowerGroup said.
The U.S. Pension Protection Act of 2006 made changes to defined-benefit and defined-contribution plans. It was created to remedy the underfunding of many defined-benefit plans, address the future of tax-advantaged savings plans created by the Economic Growth and Tax Relief Reconciliation Act of 2001, and grant employers the authority to offer automatic enrollment and salary deferral features to defined-contribution plans.
TowerGroup said automatic enrollment will lead to a 20% increase in the number of participants in defined-contribution plans.