By Maria Valdez Haubrich
Do you wish you could offer your employees a retirement plan to help you compete against bigger employers with hefty benefits packages? A Senate panel is planning to introduce new legislation to make it easier for small business owners to offer their employees retirement plans without busting their budgets, reports USA Today.
According to data from the Employee Benefit Research Institute, just 36 percent of employees at companies with 10 to 100 employees had access to a company-sponsored retirement plan in 2011. In a survey by Nationwide Financial conducted late last year, 78 percent of small business owners said they would like to be able to offer a retirement plan so they can attract more qualified job candidates. And 37 percent said their own workers are pressuring them to offer a retirement plan.
The General Accounting Office (GAO) looked into reasons why smaller companies typically don’t offer retirement plans, and found that “economic uncertainty” was a big factor. In other words, companies want to feel confident they can maintain a certain level of profitability before they commit to sponsoring a retirement plan. In today’s upu-and-down economy, greater uncertainty about continued profitability may be making small business owners even more reluctant than usual to commit to retirement plans.
Considering all these factors, a Senate Special Committee on Aging has announced it will introduce legislation in the next few months that would enable small businesses to pool their resources and assets into multi-employer retirement plans with other small businesses. The plans would have qualified financial experts to handle the administrative and fiduciary duties that often intimidate small business owners, the committee said.
In reality, there are actually many different retirement plan options available to small businesses. There are even plans for sole proprietorships with no employees. Fidelity, Vanguard and ING Direct are among the companies offering small business retirement plans. But despite the options, there is still a widespread perception that such plans don’t exist, or that they are too costly or complex for small businesses to handle.
The changes proposed by the Senate committee would not only help small business employees, but also help small business owners. A recent survey by the American College showed that about one-third of small-business owners do not have a retirement plan such as a 401(k), SEP IRA or deferred annuity.
Image by Flickr user urban_data (Creative Commons)
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