Data & Research June 26, 2017

Only 53% of Small- to Mid-Sized Businesses Offer Retirement Plans

Cost and oversight are cited as main obstacles.
Reported by

Only 53% of small- to mid-sized businesses, those with five to 250 employees, offer a retirement plan, The Pew Charitable Trusts found in a survey.

Ninety-three percent believe their employees would prefer a higher salary or other benefits. Employers are much more likely to offer paid time off (86%) and health care plans (61%) than a retirement plan. In addition, only 45% offer dental or vision insurance and 22% tuition assistance.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Firms are more likely to offer a retirement plan if they are older and larger. The likelihood of a firm offering a retirement plan is either in its first 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 retirement benefits program,” Pew says in its report, “Employer Barriers to and Motivations for Offering Retirement Benefits.”

Asked why they offer plans, employers said it is to help employees save for retirement (96%), to attract and retain employees (89%), to improve employee performance (91%), to give tax advantages to employees (77%) and to give tax advantages to managers (58%).

Most employers offer contributions. However, only 34% automatically enroll participants and only 14% use automatic escalation. Among those that do not automatically enroll participants, 41% said they thought their employees would not like that, and among those that do not automatically escalate deferrals, 40% said the same.

Among industries, professional, production, transportation and material moving companies are more likely to offer a retirement plan than companies in natural resources, construction and maintenance. Pew says that the former set of companies are more likely to have full-time workers.

As to why they do not offer a plan, 37% said because it is too costly and 22% said they do not have the organizational resources to manage a retirement plan. While most employers were at least somewhat familiar with 401(k) plans, far fewer knew about Simplified Employee Pension (SEP) plans, Savings Incentive Match Plan for Employees (SIMPLE) individual retirement accounts (IRAs) or myRAs, which are designed for small firms and individuals, Pew said.

Among the companies that do not have a retirement plan, 67% said that if their business profits rose, they would consider starting a retirement plan. Another 60% pointed to the possibility of an increase in tax credits for companies starting a plan as motivation for them to offer one.

The Pew report can be downloaded here.

Data & Research June 23, 2017

Written Financial Plans Help Americans Make Good Choices

Nearly three-quarters (72%) of Millennials developed their written financial plans with professional help, Charles Schwab finds.
Reported by

People with written financial plans are more confident, more engaged with their wealth and demonstrate more positive saving and investing behaviors than average Americans, according to Charles Schwab’s new Modern Wealth Index.

Just 24% of Americans say they have a financial plan in writing. The index found 54% of those with a written plan increased their 401(k) contributions in the past year, significantly higher than the percentage to do so among those without a written financial plan. Half with a written plan rebalanced their 401(k) portfolio, compared to 24% without a written plan.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

In addition, 83% of those with a written financial plan are aware of the fees in their brokerage account, 45% have an emergency fund, and 40% stick to a monthly savings goal, compared to 67%, 26% and 19%, respectively, of those without a written plan.

According to the index, more than one-third of Millennials (34%) say they have a written financial plan, compared to 21% of Generation X and 18% of Baby Boomers. Nearly three-quarters (72%) of Millennials developed their written financial plans with professional help, and 91% of them review or update their financial plans at least annually.

However, some Millennials’ immediate money habits do not coincide with long-term planning. Six in 10 lack a monthly savings goal (62%) or a household budget (58%). Less than one-third (30%) have built an emergency fund to cover at least three months of living expenses

Millennials also have room for improvement when it comes to debt management. Two-thirds (67%) say they don’t always make their student loans and mortgage payments on time, and nearly seven in 10 (69%) say they have credit card debt.

As Millennials age, their habits appear to improve, however. Among older Millennials in their thirties, 57% say their financial health is better than it was five years ago and nearly half (47%) say they have a household budget compared to those in their 20s (35%) who admit they do not.

The Modern Wealth Index, developed in partnership with Koski Research and the Schwab Center for Financial Research, is based on Schwab’s Investing Principles and composed of 60 financial behaviors and attitudes—each assigned a varying amount of points depending on their importance. The index broadly assesses Americans across four factors: goal setting and financial planning, saving and investing, staying on track, and confidence in reaching financial goals. Based on the total number of points received, respondents were indexed on a 1 to 100 scale for each of the four factors and an overall score.

The online survey was conducted by Koski Research from April 12 to April 20, 2017, among 1,000 Americans ages 21 to 75.

«