America’s Small Business Are Booming, Just Not Their Retirement Plans

America’s small businesses have a big problem.

While publicly traded companies dominate headlines, most US businesses are small and privately owned. Yet retirement savings access hasn’t kept pace: Nearly two-thirds of employees at businesses with fewer than 50 workers lack access to a retirement plan, according to Georgetown University research. And we don’t have to tell you how nervous Americans are about retirement; just picture the “This is Fine” meme of a cartoon dog sitting at a table in a burning room surrounded by flames.

Many small businesses assume offering a retirement plan is too expensive or time-consuming. Accountants, lawyers and financial advisors serving those firms sometimes share that perception. But those concerns may be overstated, according to a Boston College survey. “Professional service providers for small employers are trusted partners in key business decisions,” researchers said in the survey. “Improving knowledge and shifts in framing, as well as more involved guidance, can meaningfully influence whether a small business offers a retirement plan.”

Run for Coverage

There are affordable options even for businesses operating on thin margins. Boston College researchers pointed to 401(k) plans costing employers less than $2,000 annually for a five-person firm and under $3,000 for a company with 25 employees. The survey also found:

• Advisors who actively help clients set up retirement plans and frame them as recruiting and retention tools are far more likely to work with businesses that ultimately adopt plans. 
• Discussions around pooled employer plans, multiple employer plans and different types of 401(k)s were also linked to higher adoption rates, while an emphasis on simplified employee pension IRAs correlated with lower coverage.

All in One Place. Some firms are trying to bridge the gap by bringing retirement plans directly onto the software platforms small businesses already use. The fintech Vestwell and Intuit announced this week a plan to embed retirement savings plans into QuickBooks, which millions of small and midsize businesses rely on for payroll, finances and employee management. 

“It’s not that small business owners don’t want to help their employees save for retirement,” Vestwell founder Aaron Schumm told Advisor Upside. “It’s just been really complicated and burdensome. If nothing changes, we’re looking at a generation that simply cannot afford to retire.”