The call for more small businesses to offer retirement plans for their employees is being answered, according to a new study.
The number of small businesses offering retirement plans are at the highest level since 2000, a new LIMRA report finds. In 2018, 43% of all small businesses offered retirement benefits. This is more than 50% higher than in 2012.
Recent initiatives at the federal and state level to expand access to workplace retirement savings may be contributing to this growth, the report says.One of the main objectives of the SECURE Act, for example, is expanding access to 401k plans for employees of small businesses.
The study had more good news for the benefits industry, finding three-quarters (75%) of small businesses report they are “stable” or “expanding.” In 2012, just 61% of small businesses felt similarly.
This increase in stability and growth is seen as a positive sign for the employee benefits industry since expanding businesses have a greater need to enhance their benefits offerings to attract talent.
According to the U.S. Census Bureau, there are more than 5.8 million small businesses in the United States with 2 to 99 employees, representing 98% of all U.S. employers and about a third of the total U.S. workforce.
The report attributes the increase in insurance and retirement benefits to a stronger economy and record-low unemployment rates. To compete in this market, small employers may feel pressure to offer a more robust benefits package to attract and retain the right talent.
A new trend LIMRA is seeing in the workplace benefits space is the growth of non-traditional offerings. Overall, 58% of small businesses offer some type of nontraditional benefit.
The most common of these benefits is paid time off (PTO), such as paid vacation and sick time. Today, 45% of small businesses offer PTO. Work-life benefits—such as flexible schedules, compressed workweeks, or remote working arrangements—are offered by almost 1 in 5 small employers.
It is not surprising that these benefits are popular, since there is generally little direct cost associated with making these arrangements available. In contrast, less than 5% of small businesses are offering newer benefits such as financial wellness programs, identity theft protection or genetic testing.
The study found small businesses that currently offer benefits show every intention of continuing to do so. Just 2% of firms with benefits intend to drop an insurance or retirement benefit within the next two years. In contrast, 6% of small employers say they want to offer a new insurance benefit and 4% say they plan to offer a new retirement benefit.
For those who are interested in adding a benefit, 21% said they want to add a medical plan and 19% want to add a retirement benefit.
LIMRA researchers find small employers are viewing benefits as more important than in the past. Compared with three years ago, 42% of firms with benefits believe it is moreimportant to offer insurance benefits today, while only 1% feel it is less important.
Likewise, 40% of small employers feel that offering retirement benefits is moreimportant today. This sentiment increases with company size, with almost two thirds of firms with 50 to 99 employees sensing that benefits have grown in value. This is good news for workers who often rely on their employers for these benefits to attain financial security.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.