Small Businesses Still Struggle to Offer Retirement Plans

A study prepared for the U.S. Small Business Administration (SBA) found that nearly 72% of workers in small companies have no retirement plan available.

Small Business Retirement Plan Availability and Worker Participation, by Kathryn Kobe of Economic Consulting Services, found a major stumbling block keeping many small firms from offering a retirement program is the cost of setting up and running it. The study defines small businesses as those with fewer than 100 workers.

In general, the study found, 58 million workers—nearly half of the entire U.S. workforce—have no workplace retirement plan access. Another 20 million workers with plan access through work do not participate. 

In a separate report, Saving for Retirement: A Look at Small Business Owners, Advocacy Economist Jules Lichtenstein offers further evidence for concern that business owners are not saving enough for retirement. This working paper showed that 38.5% of owners of businesses with 10 or more employees participated in a 401(k)/Thrift plan, compared to only 16.1% of business owners with fewer than 10 employees. These microbusiness owners represent 91% of the owners in the sample.

“Retirement plan coverage of both business owners and workers is low. These studies give us new information about the particular gaps in retirement plan savings,” said Acting Chief Counsel for Advocacy Susan M. Walthall. “We hope that, armed with this information, policymakers and small-business owners can take steps to close the gaps and ensure that workers are able to plan and save adequately for their retirement.”

The Kobe report is available here. The Lichtenstein document is available here.

Both studies use nationally representative data from the Census Bureau’s Survey of Income and Program Participation.