Small Business Employers Not Eager to Offer Retirement Plans

Nearly half (47%) of small business owners who do not currently offer a 401(k) said they never intend to offer one, according to a recent survey.

Only one-third (35%) of all small businesses offer retirement benefits to their employees, a number unchanged from one year ago. Of those small businesses who do offer such benefits, only 13% of these benefits are in the form of a 401(k), compared to 14% in 2006, said the second annual Small Business Annual Retirement Trends survey (SBART) commissioned by ShareBuilder Advisors, LLC. Owner-only firms are least likely to have a 401(k) program (8%).

Why Offer a 401(k)

The top reason employers gave for not planning to ever offer a 401(k) was “not enough employees to make it worthwhile,” followed by “can’t afford to offer company match,” and “employees not interested.” Further, 52% of employers without a 401(k) do not know what to expect to pay in annual administration fees.

For those considering a 401(k), the most common reason was the incentives provided via tax breaks (26%). However, even of those small businesses that do offer a 401(k), nearly one quarter is not actively encouraging their employees to participate.


Only half of small business employers indicated they feel a strong or some sense of responsibility to offer a retirement plan. Half of all employers at micro businesses (1 – 25 employees) feel no responsibility to offer retirement plans while three-quarters of employers of small businesses (26 – 50 employees) feel they have either a strong or, at least, some level of responsibility.

Contrarily, 64% of employees of small businesses said the 401(k) is an important benefit that employers should be obligated to offer. Female employees feel more strongly than male employees that employers are obligated to provide retirement benefits (70% vs. 60%).

Less than 20% of employers said they believe a 401(k) plan would prevent their employees from leaving, however, nearly 40% of employees indicated they would leave their current job for one that provided a 401(k).

Confidence Levels in Retirement Savings

Small business employers are more confident overall in their retirement savings (53% very/somewhat confident) than employees (41%).

Employees surveyed are most likely to use 401(k) accounts to fund their retirement at least in part, but employers surveyed are most likely to rely on personal investments in IRAs, stocks and mutual funds, the release said. In addition, less than 40% of employers said retirement plans are crucial in attracting and retaining employees versus nearly 60% of employees. Nearly half of employees surveyed said they believe Social Security will not be around when they retire, where two-thirds of employers said they believe it will.

Female owners in general are less confident in retirement preparedness than male owners (39% vs. 58%) and are less likely to have personal investments like an IRA (44% vs. 55%), stocks (32% vs. 53%), and mutual funds (32% vs. 49%).

Both employers and employees have a lack of overall satisfaction with their retirement benefits. Only one out of four employers and employees reported being extremely/very satisfied with the retirement benefits offered by their company.

The survey was conducted online within the United States by Harris Interactive from July 26 through August 28, 2007 among 519 small business employers (including owners, partners CEOs, chairmen and presidents with 1-50 employees) and 1,147 full-time small business employees aged 18 and over.

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