What’ll it take for small business owners to offer a 401k and IRA if they don’t already do so?
The Pew Charitable Trusts asked 1,600 small- and medium-sized business owners about needed incentives to institute a 401k plan, and automatic enrollment and pre-determined deductions from their pay came up big.
Employers without plans were either somewhat or strongly supportive of the concept. Many said the main reason for this support was that the auto-IRA plan would help their employees.
Support for an auto-IRA initiative proved highest if the plan would be sponsored by an insurance or mutual fund company; it dropped if a state or federal government ran the program.
Still, more than 40 percent supported a government-run program.
“The responses, in one of the few such surveys conducted in the past decade, generally show strong support for offering retirement benefits and for various policy initiatives that would boost savings,” according to Pew. “States have been considering an array of policy approaches to help more private sector workers save.”
Among those, it notes, are creating state-sponsored individual retirement accounts funded automatically from employer payrolls (auto-IRAs), authorizing state-administered plans that cover workers from multiple employers, and setting up online marketplaces that provide plan options for employers.
“As policymakers in more states consider measures to help private sector workers save for retirement, the views and concerns of employers—particularly small- and medium-sized business owners—have been a major topic of discussion,” it adds. “Americans accumulate the vast majority of their retirement funds through employer-sponsored defined contribution plans, such as 401(k) accounts. However, more than 40 percent of full-time employees do not have access to one.
Among the major findings:
- Employers most often cited expense, limited administrative resources, and lack of employee interest as main reasons for not offering retirement plans.
- Three-quarters of business owners who do not offer a plan said that under current circumstances, they would be no more likely to offer one in the next two years than they are now.
- Key changes that could lead employers to offer a plan include greater profitability, financial incentives, and increased demand from employees.
- If their state implemented an auto-IRA plan, 13 percent of businesses that already have plans said they would drop theirs and enroll their workers in the state program. Meanwhile, half of those without plans said that they would start their own rather than go into the state program. For employers that have been contemplating whether to start a plan, the auto-IRA program might nudge them to consider plan sponsorship.
- Employers expressed strong support for voluntary programs such as online marketplace exchanges or multiple employer plans.
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.
