Businesses Not Keen on State-Run Retirement Plans

Small and mid-sized employers surveyed by the Pew Charitable Trusts most often cited expense (71%), limited administrative resources (63%), and lack of employee interest (50%) as main reasons for not offering retirement plans.

Three-quarters of business owners who do not offer a plan said that under current circumstances, they would be no more likely to offer one in the next two years than they are now. Key changes that could lead employers to offer a plan include greater profitability, financial incentives, and increased demand from employees.

When asked about individual retirement account (IRA) plans funded entirely by employees that use automatic enrollment and pre-determined deductions from their pay, employers without plans were either somewhat or strongly supportive of the concept. Many said the main reason for this support was that the auto-IRA plan would help their employees.

State-Run Plans Not Widely Embraced 

At the same time, that support varied somewhat depending on which entity served as the program sponsor. Support for an auto-IRA initiative proved highest if the plan would be sponsored by an insurance or mutual fund company; it dropped if a state or federal government ran the program. Still, more than 40 percent supported a government-run program.

If their state implemented an auto-IRA plan, 13% of businesses that already have plans said they would drop theirs and enroll their workers in the state program. Meanwhile, half of those without plans said that they would start their own rather than go into the state program. For employers that have been contemplating whether to start a plan, the auto-IRA program might nudge them to consider plan sponsorship.

Employers expressed strong support for voluntary programs such as online marketplace exchanges or multiple employer plans. 

The Pew Charitable Trusts recently surveyed more than 1,600 small and medium-sized business owners or managers to better understand the barriers to—and motivations for—offering retirement plans and to get their views on policy initiatives. The survey included employers who sponsor plans and those who do not. The responses, in one of the few such surveys conducted in the past decade, generally show strong support for offering retirement benefits and for various policy initiatives that would boost savings.

The Pew Charitable Trust’s Issue Brief about its findings is here.