Employees working in businesses with less than 100 workers are significantly less likely to have an employer-provided retirement plan, despite the incentives available for small businesses to offer such plans. This issue is the focus of a research brief published by the Washington, D.C.-based Employee Benefit Research Institute (EBRI).
The EBRI brief reveals that the institute, in collaboration with the Center for Retirement Research at Boston College and Greenwald Research, recently conducted a survey among small businesses to understand their attitudes, concerns, and knowledge about retirement plans.
According to the survey results presented in the EBRI brief, 47% of small business owners who provide a plan and 22% who do not are aware of states' initiatives to mandate employers without a retirement plan to automatically enroll their employees in an individual retirement account (IRA). The survey further revealed that only 21% of small businesses offering a plan would cease to do so if their state implemented this policy. On the contrary, 68% stated they would continue offering their plan.
The EBRI brief also highlighted that nearly three-quarters of surveyed business owners were unaware of tax credits up to $5,000 designed to offset the cost of initiating a retirement plan. Furthermore, 78% perceived these tax credits as somewhat incentivizing towards starting a plan.
In terms of why businesses choose to offer plans or not, more than nine out of ten small businesses surveyed said they offer a plan due to its positive impact on employee attitude and performance. Conversely, those that do not offer a plan cited costs associated with administering a plan and business profitability as primary reasons for their decision.
The brief concluded by stating: "Better profitability is a factor that could cause many of those not offering a plan to offer one, but other reasons cited as preventing them from offering a plan may not be as big impediments as believed given a better understanding of the costs of administering a plan."
