According to the Pew Charitable Trust, 58% of American workers have access to an employer-based retirement plan. For employees at small businesses, the news is worse: Only 30% of small businesses offer their employees a retirement plan.
History Of State-Run Retirement Programs
Over the past few years, many states have considered instituting state-run programs that offer private-sector workers access to retirement plans. In Massachusetts in 2012, House Bill 3754, “An Act to Provide Retirement Options for Nonprofit Organizations,” was signed by then-Governor Patrick. The bill allows nonprofit organizations with fewer than 20 employees entrance into a contributory retirement plan.
At the time, the state treasurer oversaw a contributory plan for 300,000 members with more than $5 billion in assets, and the National Conference of State Legislatures stated that the legislation—which was supported by the Massachusetts Nonprofit Network—was the first of its kind in the nation.
Benefits & Considerations
Today, an increasing number of states are considering initiatives that would expand retirement plan availability—not just to nonprofits, but to all employers. Because data suggests that a startling number of American workers have not saved enough for retirement, it is no surprise that momentum is building for legislators to address the problem.
However, concerns exist in the small business community. The Council of State Chambers recently commented, “Though these types of programs would be administered by states with employers’ primary responsibility being payroll deductions, businesses have raised concerns, primarily that a new mandate could create unforeseen administrative burdens and potential liability on employers.”
The concerns for the small business owner is obvious. The small business owner does not want nor need another government mandate, additional administrative burdens, or increased liability are issues. Still, affording more U.S. workers the opportunity to save for retirement is clearly a compelling, ongoing issue.
As with many challenges small business owners face, partnering with a full-service Professional Employer Organization (PEO) may be the answer for several reasons.
- Most PEOs already offer robust 401(k) retirement plans for client’s employees.
- Given the economies of scale, the cost to the small business owner if negligible, if any.
- Moreover, because the PEO is the fiduciary for the plan, most liability concerns are also addressed.
- Most importantly, by partnering with a PEO and adopting a tried and tested 401(k) program, the small business owner becomes an employer of choice for those seeking employment in a competitive job market.
Waiting for state regulators to make the call is, of course, an option. However, a wiser approach would be to consider partnering with a PEO—they’ll take on the role of administering retirement income (and much more) for the workers of partner companies.