The Pew Charitable Trusts quotes its own research in an apparent bid to boost state-run retirement plans.
The polling and policy organization finds that one-quarter of private-sector workers in the United States lack access to a workplace retirement savings plan, “making it difficult for them to build the resources needed to support themselves after their working years.”
It notes that workers at small- to medium-sized businesses—those with five to 250 employees—are least likely to have access to retirement savings options.
“To improve retirement security and to reduce future government spending on social services for the elderly, many states are looking at ways to increase access to private sector employer-sponsored retirement plans,” writes John Scott, director with The Pew Charitable Trusts.
He adds that policymakers are considering legislation “to help employers start their own plans or look to set up state or city-sponsored individual retirement account (IRA) plans that automatically enroll private sector workers who do not have access to workplace plans.”
Citing 2016 research from Pew, he notes that “employers care about their employees’ financial well-being but are concerned about potential costs, administrative capacity, and familiarity with the options when considering whether to offer a plan. In addition, 93 percent believe that their workers would prefer a higher salary over better retirement benefits.”
Among other key findings:
- Just over half of the small and midsize businesses surveyed offer a plan; many are more likely to offer paid time off and health plans than retirement benefits.
- Firms that are more likely to offer retirement plans are often older and larger, have more full-time employees, outsource their payroll, or have had increasing earnings in recent years. The likelihood of adding a plan grows fastest in a firm’s first few years or as it approaches 75 employees. This suggests that businesses may need to reach a point of financial stability before taking on responsibility for a benefits program.
- More than a third of employers that sponsor a plan offers more than one type. Options include defined contribution plans, such as a 401(k)s; traditional pensions; or hybrid plans that combine elements of both. Defined contribution plans are most common.
- Employers most often mention helping workers save for retirement and attracting and retaining employees as the main reasons they offer plans.
- Most employers that sponsor a plan make contributions, which boosts employee participation and helps build savings more quickly.
Surprisingly, the Pew research found “few employers use features known to boost participation and savings in plans; just 32 percent use automatic enrollment, while only 14 percent use automatic escalation of contributions.”