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Fewer Hispanics join employer retirement plans
By Aïssatou Sidimé, Express-News Business Writer
November
28, 2005
Hispanic workers participate in company-sponsored retirement plans at much lower rates than other ethnic groups, according to a new study.
About 29 percent of Hispanic workers contributed to employer-sponsored savings plans in 2004 compared with 53 percent for whites and 46 percent for blacks, according to a report by the Employee Benefit Research Institute.
The lower participation rate is due partly to first-generation Hispanic workers who are the least likely to save of all groups.
But experts say all Hispanic workers face a lack of experience with retirement options, generally lower incomes and a tendency to work for employers who don't offer savings plans.
Non-native Hispanics were half as likely to participate in employer retirement plans as native Hispanics. Twenty-one percent of non-native Hispanics participated versus 41 percent for native Hispanics. First-generation Hispanic workers send much of their free income back to family members in native countries where many plan to return some day, said Craig Copeland, senior researcher at the institute.
"There's still a lot of reverse immigration so many probably think 'Why leave your money tied up here when you are going home at some point?'" he said.
"If you just moved to this country, you don't really understand the Fidelity investment commercials on TV," Copeland said. "As far as I know there isn't a big push on Spanish-language television to focus on retirement saving."
Forty-three percent of all Hispanic workers said they knew nothing about retirement savings compared with 12 percent for the broader population, according to a July report by the Retirement Security Project and the National Council of La Raza.
Luisa Grillo-Chope, economic security policy analyst at the National Council of La Raza, said Hispanics workers often lag in retirement saving because they fill a disproportionate share of low paying, manual jobs. They make up roughly one-third of all private household workers and non-supervisory agricultural and forestry jobs, she said.
Those jobs pose multiple obstacles to retirement planning.
"They often have no retirement plans and are in jobs that are vulnerable to underreporting of Social Security earnings," Grillo-Chope said. "So they are likely to get less in Social Security payments later while also having no retirement payments from former employers."
Jose Perez, vice president of operations at Fairway Landscape & Nursery, says the seasonal nature of his field discourages many employees from sticking around to participate in the company 401(k) plan.
Fewer than half of Fairways 48 employees have been there at least six months and qualify for the plan. One Mexican national who has been with him eight years refuses to join the plan despite a $1-for-$1 company match on the first 4 percent of contributions. Another longtime employee dropped out of the plan.
"I think it's just a burden for them," Perez said. "They can't afford it."
Small employers often are so overwhelmed by keeping their businesses afloat that they don't have the time or capital to offer a retirement plan, EBRI officials say.
Employers have the lowest disparities in participation when they automatically enroll workers in retirement savings plans. Participation jumped from 18 percent to 75 percent among Hispanic workers at companies that began automatic enrollment, according to one study by Brigitte Madrian, an economist and professor at the University of Pennsylvania Wharton School of Business.
San Antonio-based Clarke American saw a sustained 25 percent increase in employee participation, to 90 percent, by shifting to auto enrollment and offering a 3 percent company match.
Employees - particularly young workers in call centers - liked that their investments were deducted before they received their paychecks, said Paula Jacklin, director of compensation and benefits at the check printer.
"When you take it out of their income, employees don't miss it because the lost cash is made up by an offset in taxes," she said.
The EBRI study says company outreach also is a significant factor in employee participation in retirement plans.
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