Small Business Owners Confident, Offering Plans

Warren Buffett recently highlighted the plight of small businesses with his plea for more PPP loans to counter the economic fallout of the current pandemic, arguing that “the country owes it to the millions of small-business people.”

Adding a timely reinforcement of Buffet’s comments, J.P. Morgan released its pulse survey of small businesses in December.

It found that, despite the dire straits in which certain small business sectors find themselves, a large majority of respondents—85%—are confident that their businesses will survive the current economic climate, even though the survey occurred in the midst of the COVID-19 pandemic and stay-at-home mandates across the nation.

It also found that almost half of small business owners offer a retirement plan as an employee benefit, and most of those are 401ks. More than one-third of small business owners who do not currently offer a 401k plan expect to introduce one within the next 12 months.

“In a year when so many small businesses were forced to rethink how they offer their products and services and how they conduct business, I was excited to see the vast majority were optimistic they would survive,” Meghan Jacobson, Executive Director, Head of U.S. Insights with J.P. Morgan Asset Management, said. “This is despite the fact that the survey was conducted in the middle of a global pandemic and stay at home order. About 85% of small business owners did expect to make it to the next year, which was terrific to see.”

Jacobson and her colleague Alexandra Nobile found the vast majority of small business owners felt a high level of responsibility to provide health care coverage, as well as to help with employees’ overall well-being and work-life balance.

“Most, albeit fewer, also reported feeling responsible to help with employees’ financial wellness and retirement savings,” they added. “Interestingly, significantly more small business owners who offered a retirement savings plan felt a high sense of responsibility to their employees compared with those who did not offer one (74% vs. 33%).”

Aside from COVID and its economic complications, Jacobson credits the SECURE Act and employee retention as reasons small business plans are attracting attention.

“I think the tax benefits can be a meaningful motivator,” she said. “And about 70% said they want to offer a retirement plan to help retain employees. Especially in a market where talent matters more than ever, it’s critical for small business owners to think about investing in their people currently on their books and as they think about attracting new employees. Offering a retirement plan can really be a good benefit to help small businesses stand out from one another.”

For those not offering a retirement plan, the reasons were eye-opening:

Business not generating enough revenue to offer this benefit (39%)
Employees don’t care/aren’t asking (28%)
Employees are saving in other ways (25%)
Other benefits are good enough (24%)
Administration is too costly (24%)

Nonetheless, J.P. Morgan found that most employees, regardless of their employer’s size, expect these types of benefits and expect their employer to be concerned with their overall financial picture.

“Next year, we want to dive into that a little bit deeper for the small business employee,” Jacobson concluded. “There is this recognition that to retain your employees and attract new ones, retirement benefits are table stakes.”

J.P. Morgan surveyed small business owners with revenue between $50,000 and $20 million, and between five and 50 employees, in June 2020.

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John Sullivan

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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.