Open MEPs are most likely to succeed if they offer a variety of plan and fund options along with lower costs than small businesses are paying now, according to a recent study.
With Congress considering proposals to expand multiple employer plans to give small business owners more options to offer retirement plans, the Empower Institute set out to determine the level of interest among such businesses.
In the resulting study – “Open MEPs: A promising way to narrow the coverage gap” – the organization concluded that small business owners are in fact enthusiastic about the prospect of offering open MEPs. It found that 66% of small business owners that do not offer a retirement plan are likely to consider an open MEP, and the same proportion of owners that do offer a plan say they would consider switching to an open MEP.
The study’s findings are based on a survey conducted by Empower Retirement in the fall of 2018 among 304 small businesses across industries and ranging in size from five to 250 employees.
When these small businesses were asked to select the single most important MEP attribute from a list of attributes, they prioritized the variety of plan and fund options (29%), and lower costs for both the organization (19%) and employees (14%).
The survey also revealed that small businesses generally understand the importance of offering a retirement plan, with nearly two-thirds of respondents (63%) selecting “it’s the right thing to do” as their top rationale for offering or wanting to offer a plan to their employees. Notably, this response edged out business objectives such as employee retention and attracting talent (59%).
In addition, more than half of the businesses that don’t have a plan said they are likely to consider offering one within the next two years. For businesses that do not currently offer a plan, cost was cited as the biggest concern, followed by their perception that they are not large enough to offer a plan and their lack of expertise.
Small business employers also feel a strong sense of responsibility to provide financial education to employees and they believe that retirement readiness is an important measure of retirement benefit success, the study emphasizes.
As to what types of organizations should sponsor the plans, employers reportedly said they would be most likely to consider and trust retirement plan providers to administer an open MEP, according to Empower’s research. Banks, financial advisors and the national government were also highly trusted by respondents.
The survey also reveals that 50% of small businesses associate open MEPs as coming with help from financial professionals. As such, the study suggests that coupling the advice of a financial advisor with a retirement plan provider could be a combination for small businesses to consider if a policy proposal becomes law.
“We see the evolution of open MEPs as an opportunity to serve the small end of the market and for advisors to provide financial services to a new audience, which has shown great interest in offering retirement plans to their employees,” notes Empower President Ed Murphy.
