A large survey of small and medium-sized businesses finds support for new policy initiatives that would increase retirement savings, despite concerns about potential costs and burdens.
The Pew Charitable Trusts recently released a chartbook summarizing the results of the survey of more than 1,600 business owners or managers nationwide. The survey, conducted to provide insight into the barriers to—and motivations for—offering retirement plans, included employers who sponsor plans and those who do not. Few such surveys have been conducted in the past decade. The findings suggest strong interest in offering retirement benefits and support for various policy initiatives to boost savings, though with some worries about specific options.
Today, more than 30 million full-time private sector workers lack access to workplace retirement plans, though research shows that when a savings option is available, the vast majority will participate. Still, many small- and medium-sized employers say they face significant challenges to offering these benefits, a fact that has led many states to consider measures to help these workers save.
Among the barriers to offering retirement savings plans most often cited by employers in the survey were the expense, limited administrative capacity, and lack of employee interest. And respondents saw little likelihood of imminent change. Three-quarters of those who do not offer a plan said that under current circumstances, they don’t see themselves more likely to offer one in the next two years.
To boost access to retirement plans, policymakers in some states are looking to automatically enroll workers, who could still opt out, in state-sponsored individual retirement accounts if the workers do not have access to an employer-sponsored plan. Often called auto-IRAs, these programs rely entirely on employee payroll contributions. State sponsorship and the fact the programs do not allow for employer contributions means less fiduciary responsibility and lower costs for employers compared with traditional retirement plans.
In the survey, more than 8 in 10 businesses without plans said they somewhat or strongly support the basic concept of a generic auto-IRA program. About three-quarters of these employers said the main reason was that such a program would help their employees.
At the same time, support for the concept varied—depending on who sponsored the program. Large majorities strongly or somewhat supported an auto-IRA initiative if an insurance or mutual fund company sponsored the plan; support dropped if the program was sponsored by a state or the federal government, though the totals were still above 40 percent.
The survey did not define plan sponsorship, but the term could have been interpreted broadly to mean that states would be investing and directly managing funds. Business reservations about state sponsorship might be mitigated by the realities of the new programs. The auto-IRA programs enacted to date include public-private partnerships with professional investment companies in control of fund management. Considering that respondents appeared more comfortable with private sector entities managing the funds, employer support for government-sponsored auto-IRA programs as they are being implemented might be closer to the levels of support reported for those sponsored by a mutual fund or insurance company.
Relatively low percentages of small and medium-sized businesses that offer plans today said they would no longer offer one if their state created an auto-IRA. Just 13 percent said they would drop theirs and enroll their workers in the state program, with the primary factor being the cost of their current arrangement. On the other hand, 51 percent of those without plans said that they would start their own, rather than participate in a new state program. This finding indicates that, for employers who have been contemplating whether to start a plan, the auto-IRA program might nudge them to do so.
The survey also sought opinions on alternatives to auto-IRA programs, such as online marketplace exchanges, where employers shop for plans, or multiple employer plans, in which employers pool assets into a single 401(k) account to share costs and liabilities. Large majorities said they would find these kinds of voluntary programs helpful. About 40 percent of businesses without plans said they would participate in such options if available.
Pew’s survey of small and medium-sized businesses—one of the few high-quality surveys of this kind conducted in the past decade—sheds light on many issues linked to retirement policy proposals. The vast majority of these enterprises, whether they offer retirement benefits or not, support policy ideas intended to improve opportunities for their employees to save for retirement. Such support proved high for auto-IRA plans, multiple employer plans, and the online voluntary marketplaces. However, the responses also provide insights about how different respondents view the upsides and the downsides for each, insights that can help policymakers as they consider and then roll out state initiatives.
See the full chartbook, “Small Business Views on Retirement Savings Plans.”
John Scott directs Pew’s retirement savings project, and Andrew Blevins is a senior associate with the project.