A belief among small business employers that offering a retirement savings plan can be costly, combined with a lack of awareness of options, helps explain why many of these employers don’t even consider them, a new study suggests.
Results from Millennium Trust’s inaugural Small Business Retirement Survey reveal that 66% of small business employers (defined as 150 employees or less) indicate that cost is the most significant barrier to providing a program. In addition, 64% of these small business employers believe their company is not large enough to offer a retirement savings solution.
Millennium Trust notes that the survey was one of the first of its kind to be conducted exclusively with employers that do not offer retirement benefits. It was fielded Sept. 28-Oct. 8, 2018, among 500 small business executives at companies with 150 employees or less that do not offer any retirement savings benefits, and 500 full-time employees working at companies with no retirement savings option.
Educational Opportunities
It would appear that opportunities exist around educating small business employers about retirement plan options, as nearly one-quarter (22%) cite a lack of awareness and understanding of plans as the biggest barrier for adoption. Yet only slightly more than half (51%) of companies with 10 or more employees researched offering 401(k) specifically and only 23% have spent time researching non-401(k) programs for their employees. Surprising, 55% of small businesses looked at a retirement plan, but still chose not to offer anything.
Despite these findings, the study further shows that more than two-thirds of employer respondents (70%) say they are likely to consider offering a retirement savings program within the next two years. What’s more, 86% say that a program is much more attractive if it poses no additional costs to the company.
Drilling down further, 76% of small business respondents said they would be willing to share in the cost, paying up to $60 per year per employee, to provide that offering. That same percentage also stated they would be more likely to consider offering a program if it also allowed them to save for retirement.
Employees Want Options
Meanwhile, the survey also appears to have uncovered differing impressions of how important a retirement savings option is when considering employment.
According to the findings, 88% of employees think it’s important to have access to a retirement plan when choosing a new employer, but just 67% of employers think it’s important to have a retirement program for employees.
What’s more, a strong majority of employee respondents (83%) say that retirement programs are an essential consideration for staying with their current employer, while 87% state that they are likely to participate in a plan if offered one. This importance is even higher for younger generations, as 90% of Millennial respondents who say that a retirement savings option is important for staying with a current employer and 91% identify it as an important factor when considering a new employer.
Yet only 23% of small business respondents strongly agree that having a retirement benefit would help them attract and retain talented workers.
“Our latest survey is a wake-up call for small businesses. Time and time again we hear the value and importance employees place on having retirement plans and how a lack of access to a workplace savings option is contributing to the overall retirement crisis in America,” explains Gary Anetsberger, Chief Executive Officer, Millennium Trust Company.
Noting that the misperceptions in the market about costs and limited options are hurting small businesses and employees, Anetsberger adds that, “It’s time employers educate themselves on other viable savings solutions that can increase retirement readiness for Americans.”
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