Only 33% of Small Businesses Offer Retirement Plans

December 06, 2012 ( - Although 75% of small-business owners view their employees as family, cost considerations prevent them from offering a retirement plan.

Small businesses’ decision to offer a retirement plan is based both on economic considerations as well as a sense of accountability, a Bank of America Merrill Lynch survey of 700 small-business owners found. Among those that offer a plan, 37% said they feel responsible for ensuring their employees have sufficient assets to sustain them in retirement. Another 29% said helping employees save for the future and addressing their employees’ financial wellness is important for their company, and 26% view it as a recruiting and retention tool.  

Those who offer a retirement savings plan offer other benefits, as well, such as paid time off (86%), bonuses (83%), flex time or alternative work arrangements (67%), financial education or advice (36%).  

Among those who do not offer a retirement savings plan, only 18% said they were concerned about their employees having enough money in retirement. The most common reason why they do not offer a retirement savings plan is that employees have not asked for a plan (54%), followed by the belief they do not employ enough employees to warrant a plan (53%), it will not help the firm’s “personal economy” (39%), it is too expensive (37%), they do not want to be obligated to contribute (28%) and it’s simply too confusing (26%).  

Rick Irace, head of institutional retirement and benefit solutions for Bank of America Merrill Lynch, told PLANSPONSOR small-business owners would likely see improved profits if more than 30% viewed retirement plans as helping their employees be “financially fit—more focused and productive.” Nearly half (49%) of the small-business owners who do not offer a retirement savings plan said the economy would have to improve before they would offer a plan, and 80% those business owners considering offering a plan within the next two years said cost is the biggest determining factor.  

With 3.3 million small-business customers, Bank of America Merrill Lynch has made it a point of offering low-cost retirement plans to offset these concerns, Irace noted. “We are committed to helping small businesses find the right retirement plan, to create loyalty between employee and employer,” he said.  


Lee Barney