by Countable | 1.11.19
According to our partners at USAFacts, a non-partisan, not-for-profit civic initiative aimed at making government data accessible and understandable, roughly 85 percent of workers at private-sector establishments with 100 or more workers were offered a retirement plan in 2017. Only 55 percent of workers at companies with fewer than 100 workers had the same access, as the graph below shows.
The people without access to employer-sponsored retirement plans can lose out on some of the tax breaks everyone else gets, and they tend to save far less for retirement.
Small businesses generally say that cost is the reason they don’t offer retirement plans. Thanks to economies of scale and negotiating power, bigger 401(k)s tend to pay lower fees. They also diffuse the various hassles associated with maintaining a plan, such as hiring a lawyer to make the required regulatory filings.
One solution would be for the federal government to help firms band together to set up Multiple-Employer Plans (MEPS), sometimes referred to as Association Retirement Plans (ARPs). The idea has broad support from financial services firms and many in the small business community.
The challenges is that the MEPS idea may not be legal, as the National Review explains:
“Put simply, the obstacles to multiple-employer plans involve a tangled mix of statutes and regulations, and it’s somewhat debatable whether executive action alone can fix the problem. With retirement plans, the key issue is [the Employee Retirement Income Security Act] ERISA’s definition of an ‘employer,’ which explicitly mentions associations acting on behalf of employers to provide benefits, but which has typically been interpreted in a narrow fashion.”
If it came to it, the Trump administration could seek to convince the courts that its proposals are consistent with ERISA, or Congress could change the law.
Do you support Trump’s efforts to make it easier for small businesses to pool together to offer 401(k) plans? Why or why not? Tell your reps what you think, then share your thoughts below.
—Sara E. Murphy
(Image Credit: iStock.com / monkeybusinessimages)
Written by Countable