Only 43 percent of small business owners offer retirement benefits to some employees, according to a recent poll, and far fewer (19 percent) make their retirement plan available to all workers.
What’s more, over half of small businesses (52 percent) are turning to freelancers instead of hiring in the traditional way, therefore eliminating the entire benefits conversation. Among those who have hired on a freelance basis, more than a third say they plan to do more of it within the next year.
These practices are creating a growing need for “creative and flexible” retirement savings solutions for the many Americans without access to employer-sponsored plans.
The poll, commissioned by the Small Business Majority, found most companies cited the high cost of plans and low resources available for plan administration as the main reasons for not offering 401ks or other retirement savings vehicles.
But data suggest employers aren’t entirely comfortable leaving workers high and dry. An overwhelming number support “a wide array of solutions that would make it easier for small businesses, freelancers and solo entrepreneurs to access retirement benefits,” according to a statement by the organization.
Just under seven in 10 (68 percent) of those surveyed are in favor of an “auto-IRA” or “Secure Choice” plan—alternatives that would automatically enroll small business owners without a plan in a state-created IRA. Participation by employees would be optional and contributions would be adjustable.
“I would like to offer a retirement plan but the high cost means it isn’t in the cards for my business right now,” said Delano Wilson, owner of M*A*C*S LLC, a communications firm in Shreveport, La. “That’s why a state-backed program that gives employees the option to save for their retirement would be a game changer for me. Besides helping my employees prepare for the future, it would also help small firms like mine compete for top workers with big businesses that already provide generous retirement packages.”
Small business owners say things like better transparency of plan costs and fees, decreased fiduciary responsibility, increased tax credits for plan administration and reduced administrative requirements could incentivize them to offer retirement benefits in the future. Many expressed interest in options allowing small businesses to join multi-employer plans, as well.
“Unfortunately, retirement plans are often too expensive or difficult for small employers to provide,” said John Arensmeyer, Small Business Majority Founder & CEO, “so these firms need options that are easy to administer and also make sense for small business’s bottom lines.”