Perhaps they have not heard of the many benefits in the SECURE Act to help with starting a retirement plan, but a new survey finds that many small business owners remain on the fence.
Apparently long-standing misperceptions about access, matching and cost remain the top barriers to adoption, according to findings in the survey commissioned by ShareBuilder 401k. It shows that at a time when many companies are boosting 401(k) benefits to attract and retain employees in a tight labor market, 74% of small businesses are still going without any plan at all.
In addition, many small business owners believe their business is too small and that 401(k)s are too costly, according to the survey, which polled 500 small business owners (SBOs) from across the country.
Responders cited three main reasons for not starting a plan:
- 58% believe their business is too small to qualify for one;
- 32% say they cannot afford a match; and
- 24% believe they are too expensive to set up and manage.
“The truth is that any business, regardless of size—and including the self-employed—can offer a 401(k) plan. There are very affordable, low-cost options and matching is not required,” notes Stuart Robertson, President and CEO of ShareBuilder 401k. “This new survey data indicates that, as a society and industry, we have to do a better job of educating the market and debunking misperceptions.”
Among the small businesses with a plan, the top reasons they started a 401(k) provided some positive insights. Those findings are as follows:
- 71% said they felt a personal responsibility as a business owner to provide one;
- 47% said they thought it helped their business attract and retain employees;
- 26% wanted to receive the tax benefits of a 401(k); and
- 21% wanted to save for their own retirement.
The survey also found, however, that many other misperceptions still seem to be prevalent. Among the most problematic, according to ShareBuilder 401k, was the belief that 10% in investment expenses is a fair amount.
“Investing can feel intimidating or opaque, and it’s important for employers and employees to know to try keep all-in investment expenses under 1%—this includes fund expenses and investment management,” added Robertson. “The difference of paying 1% more in investment expenses over a 40-year career can result in a nest egg that is hundreds of thousands of dollars less which can truly impact your retirement. Every dollar spent on expenses is one less dollar invested in the markets.”
A recent survey conducted by LIMRA’s Secure Retirement Institute found that most small employers are interested in learning more about pooled employer plans under the SECURE Act, but many cited various other concerns and reasons for not participating in one.
The ShareBuilder 401k survey was conducted by Wakefield Research between March 25–31, 2022, among 500 U.S. small business owners with 1-50 employees.