Small Businesses Wary of Offering Retirement Plans

One-third of companies with fewer than 25 employees offer retirement plans, compared to about 80% of companies with 100 or more employees, a report found.  

The report, “Small Business and Employee Retirement Savings Plans,” was a joint project of the National Center for Policy Analysis (NCPA) and PostPartisan Foundation for The Campaign for Economic Security. They found that small-business owners are concerned about the administrative costs of a 401(k)-type retirement plan, not being able to afford a company match, or lack of interest from employees. The economy and changes in retirement plan options were cited as the main causes. 

Report author and NCPA Senior Policy Analyst Pamela Villarreal contends specific public policy changes would make it easier for small businesses to offer retirement plans. One policy idea is to allow them to auto-enroll their workers into traditional IRA accounts, making it more likely that employees will stay enrolled in the system.  

“An auto-enrollment option for IRA plans would be an enormous asset because employers would have no fiduciary liability, and would not have to make matching contributions, making the plans simple and more cost-effective for small businesses,” said Villarreal.  “Businesses currently receive a tax credit for the first three years they provide a retirement plan.  Lawmakers should consider making this tax credit permanent or allowing a choice between the current flat credit and a ‘per participant’ credit.”