Small Business Owners Need a Nudge to Offer Retirement Plans

A survey reveals points about which small business owners could be educated to incent them to offer retirement plans for employees and save for retirement themselves.

Data gathered by SCORE, a nonprofit provider of mentor services to U.S. small businesses, shows that 34% of small business owners do not have retirement savings plans for themselves, and the fewer employees a business has, the less likely it is to offer a retirement plan for its employees.

Only 28% of businesses with fewer than 10 employees offer retirement plans for employees, 51% of businesses with 10 to 24 employees offer retirement plans, and 63% of businesses with 25 to 49 employees offer retirement plans.

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Seventy-one percent of businesses that do not offer retirement plans report that plan setup is too expensive, and 63% say they do not have the resources to administer such plans. Half contend their employees are not interested, although SCORE found 48% of departing employees said a lack of retirement benefits influenced their decision to leave. Twenty-two percent have not thought about offering a retirement plan to employees.

According to SCORE, small business owners may change their tune if they knew retirement savings only cost employers 2.4% of an employee’s compensation, on average, and retirement plans support employee recruitment and retention. Ninety-four percent of small business owners that do offer retirement plans report that these plans drive recruitment and retention.

As for their own retirement savings plans, 37% of business owners report they lack the profits to save for retirement, and 21% used their previous retirement savings to invest in their own business. Eighteen percent plan to sell their business to fund their retirement. In addition, 12% do not have any plans to retire, and 12% say they do not see the need to save for retirement.

MassMutual Introduces HSAs Powered by WEX Health

Clients with high-deductible health care plans can use the solution to put aside money on a tax-favored basis for eligible health-related expenses.

Massachusetts Mutual Life Insurance Co. (MassMutual) is expanding its wealth accumulation and protection benefits at the workplace by making health savings accounts (HSAs) available on its MapMyFinances financial wellness tool.

The HSAs are powered by WEX Health Inc., enabling workers covered by high-deductible health care plans to put aside money on a tax-favored basis for eligible health care expenses during their working years as well as retirement. According to MassMutual, contributions to the account may be made by the employee, the employer or both, and the account is owned by the employee.

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Survey data shows business owners are interested in speaking with advisers about health savings accounts (HSAs). That is driven by the fact that 55% of business owners think health care is the biggest expense for retirees, followed by housing (24%), food (6%) and transportation (1%). However, only 20% of business owners say they fully understand how HSAs work. Many business owners did not know that HSAs must be paired with high-deductible health plans, for example. Many also did not know that employers can contribute to an HSA and that the balances carry over year-to-year.

MassMutual cites other data from Aite Group showing usage of HSAs is projected to outpace other financial accounts for health care such as health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) by 2021. Notably, while HRAs and FSAs require eligible expenses to be validated by a third party, the IRS does not require such validation for HSAs. However, it is required that consumers keep all of their medical receipts for eligible expenses in the event of a tax audit.

Based on the data provided, MassMutual’s MapMyFinances tool analyzes the user’s personal financial needs and sets priorities accordingly. While health care coverage is typically a top priority for most people, other financial needs such as retirement savings; life, disability, accident and critical insurance coverage; college savings; debt reduction and others vary depending upon the person’s family situation and budget.

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