Previous generations placed a high priority on benefits when choosing a job. If a small business offered a high salary but no benefits, job candidates might turn it down for a lower-paying government job that had health insurance and a pension.
Now that small businesses provide more than half of all U.S. jobs, pressure is increasing to include benefits with each job offer. The Affordable Healthcare Act already has small businesses considering their responsibilities when it comes to medical benefits. But in recent years, employee advocates have begun calling for retirement plans for small business workers. If you run a small business, it’s important to know the legal requirements and options for providing retirement savings.
States Increasing Pressure
In Connecticut, Illinois, Maryland, and Oregon, qualifying small businesses must deduct a certain percentage of an employee’s paycheck for retirement. No employer matching is required yet, however, which is good news for budget-challenged small business owners; but employers are required to put a program in place and manage it in the states that have passed these laws.
The Pension Rights Center maintains a state-by-state list of updated legislation relating to small business retirement plans. Monitor this list to ensure you’re in compliance with local laws as they change.
Small Business Options
Only 14 percent of small businesses offer a retirement plan, according to the Government Accountability Office, and those employers face numerous challenges. In recent years, though, it has gradually become easier, as the financial industry has begun to meet the demand for small business retirement plans. Here are a few options for small businesses.
Employee Fiduciary—This Mobile, Alabama-based corporation specializes in low-cost retirement plans for small business. On its site, Employee Fiduciary announces that it has the lowest total fees for 401(k) plans in the country.
Vanguard—Small businesses can choose from small or individual 401(k)s and SEP or Simple IRAs with low expense ratios and no setup fee.
ForUsAll—This startup specializes in offering a 401(k) that is easy to set up and manage. Each investment has built-in administrative and investment fiduciary protection and a transparent cost structure.
Dream Forward Financial—Like ForUsAll, Dream Forward is a startup that is geared toward making 401(k)s accessible to small business owners. Employees have access to the site’s Emotional Advisor to help them determine which plan is best for them.
SaveDay—This startup provides free, personalized advice to help employees choose and manage a 401(k) plan. Employers can sign up, test drive the experience, then encourage employees to sign in and set up their own plan.
Small businesses may assume that signing employees up for a retirement plan will cost them serious money. In truth, they can often meet any legal requirements by simply facilitating the process. As they grow, employers will likely find they can start to match employee contributions. In addition, they’ll find that a retirement program can be a perk that will help them attract and retain employees.
Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries. Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.