The Fidelity Investments report shows that retirement plans are particularly helpful for small business owners in keeping workers, attracting new talent and cutting taxes.
The study reports that eight out of 10 small businesses that offer plans feel they help a lot, or at least somewhat, with employee retention and 76% said offering a retirement plan helps to attract new employees. A majority of respondents (59%), also said that they believe their retirement plans help reduce taxes. Of those not currently offering plans, one in five expect to do so in the next three years, noting employee retention and helping employees save for retirement as top reasons for sponsoring a plan.
Over 60% of small businesses that do not offer workplace retirement plans cited plan administration costs as a barrier to starting one. Also:
- three quarters (73%) said that employer contributions are too expensive
- half (49%) reported that they take too much time to manage/administer
- half (51%) said that the tax benefits of offering them are not significant enough.
“The combination of an improving labor market coupled with other economic factors such as the rising cost of health care, and a population that is living longer, emphasizes the need for small businesses to offer a workplace retirement plan,” said Edmund Murphy, executive vice president of Fidelity Institutional Retirement Services Company. “Given that small businesses create between 60% to 80% of new jobs every year, a retirement plan should be an integral part of any small employer’s benefits package, both to be competitive and to help employees meet their long-term financial goals.”
The study also shows that employers that offer retirement plans are realizing benefits to implementing them, with 95% either very satisfied (66%), or somewhat satisfied (29%), with their current plan. At least one in four respondents that both offer plans and recall concerns they had when establishing a plan also report that their plans are not as complex to administer as they initially thought, both in plan set-up and ongoing administration.
Nine out of 10 small business owners (including 77% of those not offering plans) also said they feel it is important to help employees save for retirement, and among owners who provide a plan, helping employees save was the number one reason they had decided to offer one. The majority (54%) of the owners surveyed who offer a plan also said helping employees save for retirement is more important today than when they first established their plans. Similarly, half (51%) of employers that expect to offer a workplace plan in the future identified employee retention as a primary benefit of doing so, in addition to the 32 % that noted wanting to help employees save for retirement.
Survey results were gathered in April 2004 by Richard Day Research, Inc. Interviews were conducted among 501 small business owners nationwide with 25 to 100 employees.