There's a lot of talk about the adequacy of the current 401(k) system. Naysayers complain it's not broadly accessible, and in a sense, that's true. According to the latest data from the Bureau of Labor Statistics' National Compensation Survey, 40 percent of all workers don't have access to a defined contribution benefit. (The BLS is talking only about company-sponsored benefits, not IRAs.)

In lamenting the lack of 401(k) availability, some suggest we'd all be better off with defined benefit plans. Unfortunately, the BLS indicates 72 percent of all workers do not have access to defined benefit plans. Pensions don't appear to be as realistic an alternative as some may think.

The BLS statistics include both government and private workers. This may skew the results more favorably to pensions (which most government workers have) and less favorably to 401(k) plans (which most government workers do not have). The best example is the breakdown on “public administration” workers (not including education and health services) offered by the BLS. While 87 percent of those workers have access to a defined benefit plan, only 36 percent have access to a defined contribution plan.

The BLS's geographic data may be more interesting to practitioners seeking to align their business models to the regions they service. Roughly three-quarters (73 percent) of the workers in the Northeast and West opt to participate in their company's 401(k) plan when their company offers one. The enthusiasm for the 401(k) is significantly greater than that demonstrated in the South and Midwest, where approximately two-thirds (65 percent and 69 percent, respectively) actively choose to enroll in their organization's defined contribution plan.

Based on these numbers, you'd think it might be easier to maintain a retirement plan business in the Northeast or West, right? Not necessarily. While the workers in the Midwest and South many be less excited about their retirement plan, firms in those regions appear more willing to offer these plans compared to those in the Northeast and West. The Midwest (63 percent) and the South (60 percent) surpass both the Northeast (58 percent) and West (52 percent) in the percentage of companies providing access to company-sponsored defined contribution plans.

What can we conclude from this data? If you like working with defined-contribution plan participants, you're better off being in the Northeast or West. If, instead, you prefer working directly with the company sponsors of defined-contribution plans, you may find it easier to work in the Midwest and South. Though the data represents percentages, it does give you a sense of the trends in those regions.

How might you use this knowledge of the trend in your region? Famed behavioral psychologist Robert Cialdini says “social proof” is a powerful form of persuasion. The data suggests professionals can use “social proof” of greater participant enthusiasm in the Northeast and West to encourage employees to participate in their plans. Likewise, the same can be done in the Midwest and South to convince companies to offer plans.

It's a subtle trick, but one worth knowing.

Instant Insights /

401(k) vs. defined benefit plans: A geographic breakdown

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