Big Ideas For Small-Business Retirement Plans
With employee retirement plans out of reach for so many U.S. small businesses, big ideas are in the works to create affordable savings plans.
By Martha M. Hamilton – Miami Herald:
Jeanette Howarth would love to offer better benefits to employees who work for Howarth Excavating and wishes more employees would participate in her company’s retirement plan.
She’s run the Michigan small business with her husband Richard for 28 years. At one point they offered both healthcare and retirement coverage to their staff of five. But as the cost of healthcare escalated and times got tougher, they were forced to drop the coverage. The retirement plan has survived, but participation – even by the owners – has been minimal.
Spread Thin
Although Howarth is 50 and her husband 54, their retirement savings ‘are pretty meager,’ she said. Any extra money they make goes right back into the business. They face the same obstacles as hundreds of thousands of small-business owners who work flat out just to keep operating. They don’t have lawyers, tax consultants or human resources offices to sort out complex rules; earnings can be unpredictable.
Companies with 100 or more workers have 65% participation in retirement plans. For businesses with fewer than 25 workers, the rate drops to 25%.
A recent survey by the National Association for the Self-Employed found that the biggest barrier to a business-based retirement plan was that the business owners couldn’t afford to administer or contribute to one.
One group that’s been thinking about ways to help ensure a financially secure retirement for a larger number of people is the Conversation on Coverage, a Pension Rights Center initiative launched in 2001 by 75 retirement experts and backed by numerous organizations.
Among the group’s recommendations were strategies to make it easier for small businesses to cover employees.
Read on: Sound Advice.
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