If you are employed by a small business, chances are you don’t have access to an employer-sponsored retirement plan. In fact, the smaller the business, the less likely it is to offer a retirement plan. According to GAO research, only 5 percent of businesses with four or fewer employees offer a retirement plan, compared to 31 percent of businesses with between 26 and 100 employees. For businesses with more than 100 employees, research shows that more than 85 percent offer a retirement plan.
Small employers are not avoiding these plans for lack of employee interest. According to Social Security Administration research, when an employer offers a retirement plan, the take up rate is nearly the same no matter how large or small the business may be (generally 80 to 82 percent). Results from a recent Transamerica survey were similar, finding nearly an 81 percent take up rate, regardless of the employer’s size.
What is stopping small businesses from offering a retirement plan? According to PEW Charitable Trust research and a survey by SCORE, the top two reasons are cost and a lack of administrative resources.
So, small businesses are looking for retirement plan solutions with lower costs and administrative burdens, while providing employees the protections and resources available to employees of larger businesses. And the solution is as easy as child’s play - allow employers to band together to offer a qualified retirement plan to their workers through open multiple employer plans (MEPs). The SECURE Act does just that.
The SECURE Act creates Pooled Employer Plans (which are open MEPs) that are ERISA plans sponsored by a pooled provider. The pooled provider is responsible for most of the administrative and legal obligations, such as filing Forms 5500, providing notices, and acting as the named fiduciary. Participating employers would retain responsibility for selecting and monitoring the pooled provider. Although these plans would be open to any employer, they are designed to help those employers who need it most – small businesses.
The U.S. Chamber of Commerce is dedicated to making it easier for employers to offer retirement plans to their employees to secure a healthy retirement for all workers. This is why the U.S. Chamber of Commerce supports the bipartisan work that has gone into the MEP provisions in the SECURE Act, and we look forward to making these plans a reality.