Will 2019 Bring Solution to Small Business Coverage Gap?

Even as large employers embrace cutting edge features in their retirement plans, LIMRA data shows small businesses continue to struggle when it comes to offering even basic retirement benefits.

Data shared by LIMRA shows four in 10 employers with fewer than 100 employees currently offer retirement benefits, meaning the small business employee retirement plan coverage gap remains a significant industry challenge for 2019.

The LIMRA research highlights the fact that Americans’ top financial concern is affording a comfortable retirement—and that they believe access to a workplace savings plan is the most effective way to get people to start to save for retirement. However, according to LIMRA, among employers with fewer than 99 employees, only 42% offer retirement benefits.

LIMRA researchers say there is some good news on the small business retirement plan coverage gap front. They note that 40% of small business employers say retirement benefits are more important now than three years ago, while 57% say retirement plans have remained equally important. At the same time, the LIMRA data suggests a correlation between the number of employees within the small business and the importance of retirement benefits. So, while 37% of companies with fewer than 10 employees say retirement benefits are more important now than three years ago, that number goes up to 64% for companies with 50 to 99 employees.

LIMRA data shows the importance of workplace retirement plans when it comes to kick-starting employees’ retirement savings efforts. According to LIMRA, nearly four in 10 of all workers (i.e., not just small business employees) say they began to save for retirement because their employer offered a retirement savings plan.

According to LIMRA researchers, another way small business employees might be able to utilize workplace retirement savings plans is through multiple employer plans. Multiple federal legislative proposals put forward in 2018 were intended to broaden the number of small employers who can participate in MEPs, typically by making them available to groups on unrelated employers. 

LIMRA encourages Congress and other stakeholders to keep pushing forward the conversation around “open MEPs” as one of the primary solutions to the small business coverage gap.