Simply stating that “It’s the right thing to do,” 66 percent of small business owners who do not offer a retirement plan today are likely to consider an open multiple employer plan (MEP), according to a new survey from Empower Retirement.
Open MEPs are defined contribution plans sponsored by more than one unrelated employer.
Two separate proposals, boosted by a recent presidential executive order, would broaden the scope of open MEPs by allowing more small businesses to band together to offer a retirement plan.
Small business owners’ interests in open MEPs are piqued over potentially lowering the costs to their organizations and lowering fees to employees in a workplace retirement plan offering, survey results show.
Almost all of the business owners who expressed interest in open MEPs said the biggest advantage in offering their employees a retirement plan is “it’s the right thing to do.”
Additionally, 59 percent of employers interested in open MEPs said other advantages to offering retirement plans would be employee retention and attracting talent.
However, among the top reasons why small businesses don’t offer a retirement plan to employees is because their company is too small, survey respondents said.
“Broadening terms to allow even more small businesses the opportunity to offer workplace retirement plans potentially puts more employees on a path to building their retirement savings,” Empower president Ed Murphy said in a statement.
Empower’s survey also reveals that 50 percent of small businesses associate open MEPs as coming with help from financial professionals.
“We have developed an advisor-centric model that is very important to us and to employers,” Murphy said. “We see the evolution of open MEPs as an opportunity to serve the small end of the market and for advisors to provide financial services to a new audience, which has shown great interest in offering retirement plans to their employees.”
A new paper by the Empower Institute “Open MEPs: A promising way to narrow the coverage gap” lays out more details from the survey.
Under the legislative proposals, open MEPs would allow unaffiliated small employers without the ability to administer their own plans to enroll their employees into professionally managed workplace plans that offer the economies of scale found in the plans large companies offer.
“We support proposed legislation that would make open MEPs more accessible to small businesses and their employees,” Murphy said. “Congress has an opportunity to expand coverage to more working Americans. Open MEPs would be another tool for employers to access that helps workers on the path to retirement readiness and financial freedom.”
The impact of plan access on projected income replacement at retirement is significant.
Participants who are eligible for a defined contribution plan and actively contribute have a median income replacement percentage of 79 percent compared to 45 percent for those without access.
At small businesses in the U.S. with fewer than 100 employees, less than half of workers have access to a defined contribution retirement plan, such as a 401k.
But according to the Empower survey, employees are interested in workplace retirement savings plans. Among the small businesses where owners are interested in open MEPS, 39 percent said employees had expressed interest in having a workplace retirement plan.
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.
