Small business owners are offering and investing in 401(k) plans at rates considerably higher than they were five years ago, according to a nationwide survey by ShareBuilder 401k. Twenty-four percent of the 500 small business owners polled in June now offer a 401(k), up sharply from 10% in 2008. And 58% of the owners said their current retirement savings are higher than five years ago.
Other shifts in small business owners’ commitment to retirement plans were highlighted by the poll, including:
• 65% now feel confident they’re saving enough for retirement, up from 44% in 2008
• 82% view 401(k)s as an effective way to save for retirement
• of the 28% of small businesses with a 401(k) plan that either stopped offering a match or lowered their match over the last five years, 56% have reinstated it
• 89% of small business owners with more than one employee that offer a 401(k) plan report that their plan is an important factor in attracting and retaining top talent
However, a report by the Government Accountability Office, the investigative arm of the U.S. Congress, paints a less rosy picture. The GAO report, compiled for a July 16 congressional hearing on closing the retirement plan coverage gap at small businesses, cites three difficulties facing small business owners thinking of offering a plan:
• start-up costs
• the complexity of choosing investment options
• fear of failing to meet their fiduciary responsibilities, and the attendant risk of litigation
Small business owners also cite a lack of employee interest as a reason for not offering a plan, and say that health care benefits trump retirement benefits, the report noted.
One possible solution: multiple employer DB and DC plans, which were one focus of the hearing — as we reported here.
