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Common Misperceptions Persist for Not Offering a Retirement Plan

Industry Trends and Research

While the SECURE Act and SECURE 2.0 seek to make it easier for small businesses to offer a retirement plan, many employers that do not offer coverage still appear to be clinging to the same reasons for not doing so.

According to a new survey report by the Transamerica Institute and its Transamerica Center for Retirement Studies (TCRS), 58% of employers offer a 401(k) or similar employee-funded retirement plan to their employees, including 52% that offer a 401(k) plan and 15% that offer another type of employee self-funded plan (e.g., SEP, SIMPLE, other plans except for 401(k)s).

But in what has been a decades-long dilemma, the report also reveals that 34% of employers do not offer any retirement benefits to their employees and small companies (41%) are significantly more likely to indicate they do not offer any retirement benefits, compared with medium and large companies (both 2%).

Among those that offer some form of retirement benefits, companies of all sizes cite similar reasons for doing so, including:

  • helping employees to save and prepare for retirement (55%);
  • increasing job satisfaction among employees (52%);
  • retaining existing employees (50%);
  • inspiring loyalty among employees (45%);
  • offering a competitive employee benefits package (44%); and
  • attracting new employees (43%).

Yet, among those that are not likely to sponsor a plan in the next two years, the most often cited reasons are:

  • they are not big enough (76%);
  • they are concerned about cost (31%); and
  • their employees are not interested (13%).

These findings come even as the SECURE Act and SECURE 2.0 reduce the administrative burdens and make it more cost effective for small businesses to adopt a qualified retirement plan, whether a stand-alone 401(k) or similar plan, or by joining a multiple employer plan (MEP) or pooled employer plan (PEP).[1]

The one positive is that, among companies not offering a 401(k) or similar plan, many (42%) say they are likely to begin sponsoring a plan in the next two years and 54% of them say they would consider joining a pooled plan arrangement such as a MEP, PEP, or group of plans (GoP).

Access Matters

The survey findings also illuminate a large gap in retirement savings among workers by company size, which helps show the impact of having access to workplace retirement benefits. Workers of large companies have saved $115,000 in total household retirement accounts and those of medium companies have saved $69,000, while small-company workers have saved only $36,000 (estimated medians) — still, that’s a start.

Moreover, workers are more likely to save for retirement when they have access to a 401(k) or similar plan through their employer. Almost 9 in 10 workers (88%) who have access to an employer-sponsored plan are saving for retirement in the plan and/or outside of work. In contrast, among workers who are not offered a plan by their employers, fewer than half (46%) are saving for retirement.

“Employer-sponsored retirement plans, including 401(k)s and similar plans, are the most effective way to promote long-term savings among workers. Yet millions of workers do not have access to these benefits, especially those working for small companies,” explains Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Thankfully, the SECURE 2.0 Act of 2022 makes it easier and more affordable for employers to establish new plans. It also provides new ways for employers to enhance their plans and for workers to increase their retirement savings.”

Indeed, expanding retirement plan coverage so that all workers can save for retirement in the workplace is imperative for improving retirement security, TCRS emphasizes. To accomplish this, the study suggests that the main area of focus must continue to be small companies that do not offer a plan.

Another important area of focus for expanding coverage is extending plan eligibility to part-time workers so they can participate in plans offered by their employers – which is another area addressed by SECURE 2.0, the study notes.

What’s more, current plan sponsors should consult with their plan providers about SECURE 2.0 to learn about how the new law impacts their plans including new features and compliance requirements.

The survey report further suggests that plan sponsors can do more to support employees who are transitioning into retirement. Somewhat surprisingly, TCRS found that relatively few plan sponsors provide educational resources (38%), education about transitioning into retirement (36%), and seminars about transitioning into retirement (35%).

Another surprise was that the survey found that only 15% of plan sponsors have adopted automatic enrollment.

“Larger companies have more comprehensive benefit offerings than small companies, but companies of all sizes have room for improvement, especially considering today’s multigenerational workforce,” adds Collinson.

The study – Stepping Into the Future: Employers, Workers, and the Multigenerational Workforce – examines employers’ benefit offerings, identifies employees’ unmet needs, and outlines recommendations. It is based on a survey of 1,800 for-profit U.S. employers including small, medium, and large companies (<100, 100 to 499, 500+ employees, respectively), and it features comparisons with a survey of 5,700 workers in for-profit companies conducted in late 2022.


[1] While the employer and employee surveys were conducted just prior to enactment of the SECURE 2.0 Act, the original SECURE Act was enacted in 2019 and contained many of the same policy goals of expanding coverage to small businesses to that of SECURE 2.0.