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Small-employer retirement plans

By Jennie L. Phipps · Bankrate.com
Friday, March 9, 2012
Posted: 4 pm ET

If you run a small business or are employed by one, there's a very good chance you don't have an employer-sponsored retirement plan.

According to the U.S. Census Bureau, only 29 percent of workers employed by businesses with fewer than 100 employees have access to an employer-sponsored plan. That makes retirement planning tough. By comparison, 81 percent of workers at companies with 100 or more employees have access to employer-sponsored plans.

At a hearing this week held by the U.S. Senate Special Committee on Aging, the General Accounting Office released an analysis that said more owners of small businesses don't have plans because the plans are expensive and offering them carries with it fiduciary responsibilities that small businesses don't feel qualified to accept. At the session, Senate Special Committee on Aging Chair Herb Kohl, D-Wis., announced plans to introduce bipartisan legislation to make offering a plan cheaper and easier.

Jamie Kalamarides, senior vice president of Institutional Investment Solutions for Prudential Retirement, also testified at the session, urging legislative changes that would allow small businesses to pool their assets together in multiple-employer plans to lower costs. Kalamarides pointed out that when small businesses offer single retirement plans, their costs are high -- 132 basis points on average. Retirement plans offered by larger firms cost participants just 50 basis points on average.

He thinks any legislation created to encourage small-employer retirement plans should include these four provisions:

  • Allow multiple-employer plans based on geography -- not affinity or size -- even solo practitioners and partners should be welcome.
  • Create a safe harbor, so employers who follow the rules aren't dragged down by those who don't.
  • Resemble 401(k) plans but without complex administrative requirements or costs.
  • Allow the transfer of fiduciary responsibility to a qualified financial adviser.

Tell your Congressional representatives that you want this kind of legislation to pass.

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