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Legislation would help small businesses offer retirement plans

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Bill would allow a small business to pool resources with others into a multiple employer plan

USA Today | March 12, 2012

Many small-business owners say that they want to offer their workers a retirement plan but obstacles are holding them back. On March 7, a Senate panel said it would introduce legislation to help address the problem.

People who work for smaller businesses face big challenges in saving for retirement. Only 36% of those who worked for businesses with 10 to 100 employees last year had access to a company retirement plan, the Employee Benefit Research Institute says. The lack of a company-sponsored plan affects 71% of businesses with fewer than 25 employees, the Government Accountability Office said in a 2009 report.

Small-business owners say they are not trying to avoid a retirement plan. In fact, 37% with more than six employees say they are under pressure by their workers to provide a plan, Nationwide Financial reported in November. And 78% of the owners said they need a retirement plan to better attract qualified employees. Wednesday, at a Senate Special Committee on Aging hearing looking into the problem, the GAO released an analysis that found general economic uncertainty makes small employers reluctant to commit to such long-term expenses. Employers say they need a certain level of profitability before they would consider sponsoring a retirement plan, the GAO said.

The Senate committee said legislation would be introduced in the coming months allowing a small business to pool resources and assets with other small businesses into a multiple employer plan. Experienced financial experts would take on many of the administrative and fiduciary duties that small-business owners do not have the time or expertise to monitor, said Herb Kohl, D-Wis., committee chairman.

Different retirement plans are already available to small businesses, but many owners don't know enough about them, retirement experts say. The perception is that they are more complicated and expensive than they really are, says Ken Hevert, vice president of personal retirement products at Fidelity Investments.

In response, Fidelity says it has tried to provide better information to small-business owners, including a new contribution calculator that can help them compare different types of retirement plans.

The Labor Department also plans to provide more materials that describe the highlights of each type, Phyllis Borzi, assistant secretary of Labor for the Employee Benefits Security Administration, said Wednesday.

Hopefully the changes will give small-business employees a more secure retirement future, Hevert says. "There is an increasing awareness that we are moving into the age of self-reliance."

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