A major thing that people look for if they plan for a long career with a company is a good retirement plan. However, a survey reported on by The Network Journal suggests that small businesses fall short in terms of providing this important incentive.
According to a survey from the Pew Charitable Trusts, only 53% of small-to-medium sized businesses offer such plans to their workers. The survey defines this as between five to 250 employees. To put together their findings, Pew surveyed more than 1,600 businesses nationwide in 2016, contacting owners, top executives, and human-resources managers. This is one of the few surveys focusing exclusively on retirement plans since the Great Recession.
One of the major roadblocks to retirement plans, to little surprise, is high costs. 37% of employers that do not offer retirement plans pointed to such barriers as the financial cost, and 22% said the organizational resources needed to start a plan proved to be a challenge. 17% said that employees were not interested. In general, 93% of employers said that they believe their employees would prefer a higher salary as opposed to a retirement plan.
Out of the employers who do offer plans, many of them do so to help workers save as well as help attract and retain talent. Most who offer plans match contributions to try and boost employee participation. However, few employers use other sweeteners to boost participation, such as automatic enrollment (32%) and automatic escalation of contributions (14%).
Interestingly, the small business world’s lack of retirement plans may boil down to a lack of education. Most employers surveyed were familiar with 401(k) plans, but few knew of alternatives like simplified employee pension (SEP) plans, savings incentive match plan for employees (SIMPLE) IRAs, or myRAs. All of these are designed for small firms or individuals. Then again, the question arises that if these were offered, would reluctant employees who hadn’t heard of them be willing to take part? Defined contribution plans are king in small businesses, with 92% of employers offering retirement plans having this as an option. 35% said that they offered more than one retirement plan types.
The survey also showed some regional trends in this area. Businesses in the South and West were half as likely to offer plans than those in the Northeast. Pew noted that state-by-state, full-time, full-year employees in Florida, New Mexico, and Texas reported the lowest rates of access to retirement plans.