Only 53% of small- to mid-sized businesses, those with five to 250 employees, offer a retirement plan, The Pew Charitable Trusts found in a survey.
Ninety-three percent believe their employees would prefer a higher salary or other benefits. Employers are much more likely to offer paid time off (86%) and health care plans (61%) than a retirement plan. In addition, only 45% offer dental or vision insurance and 22% tuition assistance.
Firms are more likely to offer a retirement plan if they are older and larger. The likelihood of a firm offering a retirement plan is either in its first years or as it approaches 75 employees. “This suggests that businesses may need to reach a point of financial stability before taking on responsibility for a retirement benefits program,” Pew says in its report, “Employer Barriers to and Motivations for Offering Retirement Benefits.”
Asked why they offer plans, employers said it is to help employees save for retirement (96%), to attract and retain employees (89%), to improve employee performance (91%), to give tax advantages to employees (77%) and to give tax advantages to managers (58%).
Most employers offer contributions. However, only 34% automatically enroll participants and only 14% use automatic escalation. Among those that do not automatically enroll participants, 41% said they thought their employees would not like that, and among those that do not automatically escalate deferrals, 40% said the same.
Among industries, professional, production, transportation and material moving companies are more likely to offer a retirement plan than companies in natural resources, construction and maintenance. Pew says that the former set of companies are more likely to have full-time workers.
As to why they do not offer a plan, 37% said because it is too costly and 22% said they do not have the organizational resources to manage a retirement plan. While most employers were at least somewhat familiar with 401(k) plans, far fewer knew about Simplified Employee Pension (SEP) plans, Savings Incentive Match Plan for Employees (SIMPLE) individual retirement accounts (IRAs) or myRAs, which are designed for small firms and individuals, Pew said.
Among the companies that do not have a retirement plan, 67% said that if their business profits rose, they would consider starting a retirement plan. Another 60% pointed to the possibility of an increase in tax credits for companies starting a plan as motivation for them to offer one.
The Pew report can be downloaded here.