Survey: Small Businesses Not Offering Employee Retirement Plans

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If you are planning to get by in your golden years on your company-sponsored retirement plan proceeds, make sure you are working for a large company. That's the conclusion of an annual survey which reports that most large companies offer retirement plans, while the majority of small firms do not — and that isn't likely to change any time soon.

The sixth annual Small Employer Retirement Confidence Survey (SERS) was released this week and it shows that the number of small companies planning to offer their employees a retirement plan in the next two years has gone down after years of steady growth in small company participation.

The study was conducted by the Employee Benefit Research Institute (EBRI), American Savings Education Council (ASEC) and Mathew Greenwald & Associates.

The SERS found that the percentage of companies not offering a retirement plan (nonsponsors) that replied they are very likely to begin offering one dropped in recent years — from 17 percent in 1998 to 7 percent in 2003. Another 22 percent indicated they are somewhat likely to offer a plan, but 43 percent said they are not at all likely to implement a plan in the next two years — up from 32 percent in 1998.

Further, employers that are very likely to offer a plan in the next two years are much more likely than other nonsponsors to view the plan as a competitive factor in recruiting new employees and motivating their current work force. Nonsponsors continue to point to company profitability as the key reason for not offering a retirement plan. Twenty-seven percent of nonsponsors cite low or uncertain revenue and 34 percent said an increase in revenue could spur them to offer a retirement plan.

The most recent data shows that 58.1 percent of full-time employees in medium and large firms participate in an employment-based retirement plan. However, just 28.8 percent of full-time employees at small firms (99 or fewer workers) are enrolled in such plans.

The 2003 SERS queried 300 small employers without retirement plans who offered their thoughts into why their companies do not offer plans. It also looks at what these employers know about plan options available to small businesses and what could motivate them to offer their employees a retirement plan.

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In related news, the Internal Revenue Service moved today to make it easier for retirement plans to stay within complex rules and to reduce barriers that discourage some businesses, particularly small businesses, from adopting such employee benefits.


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