Union Members Report Faring Better Financially, Yet Take More Loans

Union member participants in Taft-Hartley plans report faring better than Americans without access to a union pension fund but are twice as likely to have taken or plan to take out a loan or hardship withdrawal from their retirement savings, according to a study from the Empower Institute.

While all U.S. workers—both those in unions and those that are not—are facing economic pressures such as inflation and rising interest rates, Empower found that those in multiemployer plans have had to plan to borrow from savings at higher rates (47%) than non-union retirement plan participants (23%).

Overall, the Empower survey found more than three-quarters (76%) of union members somewhat or strongly agreed that they can afford to pay for daily needs, as compared with 66% of nonunion participants; 75% said they are able to manage debt, versus 64% of nonunion participants; 72% said they can afford to save for the future, versus 51% of nonunion participants; and 68% were confident they will be ready for retirement, versus 46% of nonunion participants. The study included recordkeeping analysis of Taft-Hartley defined contribution plan clients.

Multiemployer plans defined under the Labor Management Relations Act of 1947, also known as the Taft-Hartley Act, can include both defined contribution and defined benefit retirement plans that are collectively bargained between a union and multiple employers.

Additionally, 70% of union members said they have a solid retirement plan, versus 42% of nonunion retirement plan participants; 68% of union members were confident their retirement plan will be enough to meet their retirement income needs, versus 40% of nonunion participants; and 67% said they feel financially secure, versus 47% of nonunion participants.

Union members and nonunion participants’ top financial goals were more similar: 39% of union members said saving for retirement is a top goal, versus 30% of nonunion participants; 30% of the Taft-Hartley cohort said paying off debt or being debt-free, versus 36% of nonunion participants; and 24% of union members said building an emergency fund, versus 29% of nonunion participants.  

Loans’ Prevalence

The Empower study shined a spotlight on the prevalence of retirement plan loans taken by union members, as compared with retirement plan participants who do not belong to a union.

More than 24% percent of union members have taken, and 22% plan to take out, a loan or hardship withdrawal from their retirement savings account; the average dollar amounts for outstanding loans, $13,536, and for total hardship withdrawals, $20,785, “are notable,” the study stated.

Empower representatives did not respond to a request for clarification on how many participants with loans have their DC retirement plan as supplemental to a DB plan.

According to the research, Taft-Hartley plan members still rely on a traditional mix of defined benefit and defined contribution plans to support their retirement savings plan, both of which play a key role in preparing union members for retirement, wrote an Empower spokesperson in an email.

Outstanding loans vary by generation. Generation X plan participants held 58% of Empower loans in the dataset, with an average balance of $14,000; followed by Millennials, holding 24% of outstanding loans at an average loan balance of $12,000; Baby Boomers, holding 16% of loans at an average loan balance of $14,000; Gen Z members, hold 1% of loans at an average $8,000 balance; and Silent Generation participants hold less than 1% of loans at $16,000 average loan balance.  

“Whatever the reason for taking a loan, assets are pulled from a participant’s retirement savings account and potentially reduce future growth,” the report said.

For union members, the average defined contribution retirement plan account balance was $83,087; 10% have balances greater than $250,000; and almost 5,000 participants have more than $1 million saved, according to Empower recordkeeping analysis of more than 900,000 participants with a balance. Empower did not include corresponding account balance figures for nonunion members in the study.  

In the report, Empower made five suggestions to support union members’ retirement readiness, including:

• Communicate the vital role that defined contribution savings plans play in meeting members’ retirement income needs;
• Allow for participant contributions, if not currently allowed, and encourage participants to save in their defined contribution plans;
• Expand access to and awareness of advisory services to participants;
• Reduce assets leaked by establishing appropriate loan guardrails and educating participants on the drawbacks of taking out loans or hardship withdrawals; and
• Focus on boosting engagement by helping capture participant emails and exploring innovative engagement strategies.

The Empower survey was not limited to Empower participants: Empower contracted with Morning Consult for the poll in August 2023 among a national sample of 4,413 adults aged 18 and older, including 421 union members. Empower’s Taft-Hartley DC recordkeeping services analyzed more than 250 plans, 900,000 participants and $75 billion in assets under administration as of June 30.