Small Employer Priority = Jobs, Not Benefits

May 16, 2001 ( - While 80% of medium and large employers sponsor a retirement plan, less than half (46%) of firms with less than 100 employees offers this benefit, according to a new study.

The 2001 Small Employer Retirement Survey (SERS) sponsored by the nonpartisan Employee Benefit Research Institute (EBRI), the American Savings Education Council (ASEC), and Mathew Greenwald & Associates questioned small employers on their reasons for not offering a retirement plan. Among the reasons offered:

  • almost 20% of employers say that employees prefer wages and or other benefits;
  • a further 18% say revenue is too uncertain to commit to sponsoring a retirement plan;
  • some 15 % of respondents said that a large portion of workers are seasonal, part time, or high turnover employees;
  • just over 10% say that set up costs are prohibitive;
  • 10% say that required company contributions are too expensive;
  • some 6% say that the business is too new; and
  • 4% cite too many government regulations.

On the other hand, a growing number (38%) of small employers who do not currently offer a retirement plan say they are likely to do so within two years, according to the survey.

Lack of familiarity

Despite those reasons, many small employers appear to simply be unaware of the plan options available to them. In fact:

  • more than half have not heard of simplified employee pensions (SEPS);
  • over a third haven’t heard of traditional pension or defined benefit plans (36%);
  • some 34% don’t know what a savings incentive match plan for employees (SIMPLE) plan is, despite these being created by Congress with small employers in mind;
  • just over 20% have not heard of deferred profit-sharing plans;
  • while 2% do not know what 401(k) plans are.


When asked to site factors that would motivate them to provide a plan:

  • nearly half (44%) cited an increase in company profits, not surprisingly, since when companies of similar size are compared, sponsors tend to have higher gross annual revenues than non sponsors.
  • slightly more than a third wanted a plan with low administrative costs that required no employer contributions;
  • almost a quarter of those polled wanted business tax credits for starting a plan;
  • some 23% wanted a plan that could be tailored to the unique needs of their business;
  • almost 20% want a plan with reduced administrative requirements;
  • availability of easy-to-understand information was noted by 19% of those questioned;
  • allowing key executives to accumulate more in retirement plan was cited by 16%;
  • demand from employees, noted by 15%;
  • one in ten wanted the top-heavy rule repealed;
  • a plan that could be set up and administered completely over the Internet was mentioned by 7%; and
  • and lengthening of vesting requirements was noted by 6%.

Those That Do

Of the small employees who do offer retirement plans:

  • most offer a defined contribution plan, in fact 95% offer only defined contribution plans;
  • while 5% offer both defined contribution and defined benefit plans;
  • 58% of those offering a defined contribution plan, provide a 401(k) plan;
  • only 22% offer a SIMPLE plan,
  • the same percentage offers a deferred profit-sharing plan
  • and only 13% offer a simplified employee pension (SEP).

Reasons cited for offering a retirement plan:

  • a quarter of respondents cited the competitive advantage that sponsoring a retirement plan gives the business in employee recruitment and retention.
  • almost 20% cited the positive effect on employee attitude and performance;
  • employer obligation to provide a retirement plan for their employees was noted by 16%;
  • tax advantages for their employees, key executives and themselves was given by 9%, 6% and 4%

The survey was conducted within the US between January and February, 2001, by means of telephone interviews with 302 companies with a retirement plan and 299 companies without a retirement plan.