Only 19 percent of small businesses offer their employees a 401(k) or other employee self-funded retirement plan, according to a survey last fall by Nationwide Financial of more than 500 small business owners.
A 401(k) savings plan seems like an inexpensive perk -- a few hundred to a few thousand dollars for the paperwork. Without matching contributions, that's pretty much the extent of the cost. Nevertheless, 50 percent of employers say opening a retirement plan is too expensive, even though 78 percent say having a plan like this would help them attract and keep good employees.
One of the bills before Congress that got lost in the end-of-the year crisis over spending was a measure introduced by U.S. Rep. Ron Kind, D-Wisc., and Rep. David Reichert, R-Wash., called Small Businesses Add Value for Employees, or the SAVE Act. Among other things, this bill would help small employers to reduce the cost of offering a 401(k) by pooling their resources under a single plan with relatively easy administrative requirements.
Anne Arvia, senior vice president of retirement plans for Nationwide Financial, says the bill would not only improve access to retirement savings accounts, but also extend fiduciary protections to workers in small businesses that they wouldn't get on their own with other kinds of savings vehicles. It also would enable small businesses to easily transition to a traditional 401(k) retirement plan as their businesses grow.
Pooling to purchase not only a retirement plan, but also health, life, disability and liability insurances would be good for both employers and employees. This act doesn't offer that, but it could. Urge your senators and representatives to quit fighting and start paying attention to measures like this that could really help their constituents with important things such as retirement planning.