Ascensus White Paper Explores Opportunity to Address the Small Business Retirement Savings Deficit
Public Policy and Industry Solutions Taking on Retirement Plan Coverage and Quality Deficits
By: Ascensus, LLC
Small businesses play a critical role in the U.S. economy, employing about 47.5% of the U.S. workforce. The paper notes that the ranks of small business employment are increasingly accounted for by professionals, tech-centric entrepreneurs, and business owners over age 50. However, the small business segment has traditionally struggled to provide retirement plans for employees.
"Research suggests that small businesses are hindered by 'twin deficits' of both quality and coverage," states David Musto, president at Ascensus. "Many small businesses have no workplace retirement benefit coverage at all—and those that sponsor plans struggle with cost and complexity."
The white paper notes that a confluence of public policy solutions, industry best practices, and new technologies are being brought to bear to address the workplace savings challenge. In the public sector, new state-facilitated retirement programs have been or will be initiated in California, Connecticut, Illinois, Maryland, Oregon, and the city of Seattle. At the same time, Congress is considering long-discussed proposals for open multiple-employer plans that would allow small employers to jointly sponsor retirement savings plans.
Private Industry Solutions and Best Practice
For their part, plan recordkeepers, advisors, and third-party administrators (TPAs)–together with a steadily evolving array of technologies–
- Advisors are playing a critical role in assessing, navigating, and guiding small business plan sponsors through the increasingly complex range of choices they face in offering retirement benefits that can boost productivity and help with employee recruitment and retention.
- TPAs are collaborating with plan sponsors and their advisors to streamline regulatory disclosure and compliance and to evolve new technologies and more secure data solutions.
- Plan sponsors are increasingly outsourcing administrative functions associated with fiduciary compliance with Section 3(16) of the Employee Retirement Income Security Act (ERISA) in order to ensure that plan operations are consistent with regulatory mandates.
- To enhance savings levels for employees, small business owners are increasingly turning to Cash Balance plans, a hybrid savings mechanism that combines the flexibility and portability of 401(k) savings with the high contribution limits associated with traditional defined benefit plans. Cash Balance plans today top $1 trillion (https://www.cashbalancedesign.com/
- As the industry continues to experience consolidation among multi-purpose financial services firms, "purpose-built"
"Small business owners and employees are at the cusp of a new world with multiple opportunities to join the workplace savings mainstream,"
To download In Focus: The Small Business Opportunity, visit bit.ly/SmallBizOpp (https://www2.ascensus.com/
Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit ascensus.com. View career opportunities at careers.ascensus.com.
SVP, Marketing and Communications