So, what does it mean for state-sponsored retirement plans?
The SPARK Institute and Cerulli Associates find that small U.S. employers overwhelmingly trust the financial services sector more than the public sector when it comes to administering financial assets and retirement savings programs.
Participants in a recent survey ranked third parties, including local or state government, associations such as the U.S. Chamber of Commerce, and large financial services firms.
The results?
“Research findings suggest that retirement plan providers are favored over state and governments for administering retirement plans,” according to Cerulli. “The majority, 89%, of respondents indicate a high level of trust in retirement plan providers, compared to 53% for state governments.”
State-sponsored plans
The research also evaluated employer knowledge of state-run programs, like those established in California and Oregon.
“State-run programs―if set up correctly―can be cost-effective, and simple to administer for employers,” the Boston-based research and consulting firm noted. “They also have the strength of the law behind them to compel coverage. However, they offer limited savings capabilities and raise concerns about uniformity from one state to the next.”
“Our findings show that the proposed coverage solutions are not mutually exclusive,” Tim Rouse, executive director of the SPARK Institute, added. “State-run programs, MEPs, and individual plans all have appealing qualities to employers at different stages of their growth. An effective retirement system provides alternatives to U.S. employers and gives them the ability to move easily from one program to the other as their workforce changes and evolves.”
With several legislative proposals on the table for how to best achieve this goal and help more small employers offer a plan, SPARK conducted this study “in order to test each one for its potential effectiveness and identify to which segments of the workforce each plan type might appeal the most.”
It says its research reinforces the need for Congress to pass legislation such as the Retirement Enhancement and Savings Act (RESA), “which would complete the spectrum of coverage options and allow employers to participate in open MEPs and other measures that enhance the overall retirement system for all Americans.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
