Getting Back To Work

Adopting And Adapting DC Plans To State Compliance

Post-Covid, small businesses still face a variety of operational overhauls

by Tom Granger

Mr. Granger is Second Vice President, Qualified Plans, for Security Benefit. Security Benefit Corporation (“Security Benefit”), through its subsidiary Security Benefit Life Insurance Company (SBL), a Kansas-based insurance company that has been in business for 130 years, is a leader in the U.S. retirement market. earn more at and follow us on LinkedIn, Facebook or Twitter.

Multiple states have begun mandating that small businesses provide employees with a retirement saving vehicle. Each state is different, often requiring that employers choose between a state-run option or sponsoring one of their own.

Amid the lessening impact of COVID-19, in which 31% of businesses became non-operational, small businesses still face a variety of existing operational overhauls. Additionally, small business may have to be content with these retirement plan compliance deadlines.

In one example, the compliance deadline is fast approaching for CalSavers, California’s state automatic enrollment payroll deduction IRA program. Private businesses that employ over five people may face fines if they fail to offer employees an IRA program under CalSavers, or another private organization, by June 30, 2022.

Small businesses form the backbone of the American economy, accounting for 99.9% of all businesses in the country according to the Small Business Administration, and 47% of all employees.[1] They represent a tremendous opportunity for financial advisors to step in and provide needed guidance and smart solutions.

Here are a few easy steps to consider in helping small business clients in meeting the coming requirements of programs like CalSavers or other state mandated initiatives like in New Jersey, New York, or Colorado.

Know How Your Clients’ State Guidelines Apply To Their Unique Businesses

First up, don’t just know your state’s individual requirements. Look deeper to understand how they apply to your client’s business and its employees. It may seem straightforward, but understanding the actions required by state programs can be difficult to navigate, especially if a business’s employee benefits met the previous guidelines and are now out of date.

“While opting for a state mandated program like CalSavers could be an easy way to transition an employee IRA program into meeting state requirements,” noted Dave Byrnes, President and Head of Distribution for Security Benefit, “advisors should consider private company offerings that could meet their service-level expectations and those of their clients.” Private companies may be better equipped to meet their customer service needs rather than government-backed organizations.

Understand Your Clients’ Options Outside Of State Programs

A SIMPLE IRA may be a better alternative given the environment created by various state regulations. In most cases SIMPLE IRAs or Savings Incentive Match Plan for Employees Individual Retirement Accounts, meet the mandatory requirements of state programs. Since their inception in 1996, as a result of the Small Business Job Protection Act, SIMPLE IRA’s have provided employer matching solutions for employees outside of a typical 401(k) plan. These products are similar to tax-deferred 401(k) plans, but with less administrative responsibilities, and are designed to match the needs of businesses with 100 employees or less—which account for 2/3rds of all small business employees[2] in the country.

Work with your small business clients to figure out what they want to accomplish—what benefits make the most sense and do they comply with in-state requirements? Timing is an important factor, given state deadlines...

They are generally easier to use and set up because they were made with small businesses in mind. SIMPLEs offer greater flexibility, do not require a big employer contribution (though state mandates normally do not require a match), and are cost-effective to administer with no required IRS filings. They can be good for employees as there is no vesting schedule, and many offer a broad range of diversification options for asset allocation needs.

Alternatives For Even Smaller Businesses

If your client is a business owner with no full-time employees, or they are a freelancer or gig worker, the Solo 401(k) is another alternative to consider. They have become more common with our transitory workforce that has fed the ever-growing gig economy and community of freelancers which evolved during ‘The Great Resignation.’ Like with SIMPLEs, Solo 401(k)s are relatively easy to administer and are more robust than Simplified Employee Pension (SEP) plans. They offer tax-deferred investing, no discrimination testing and broad investment flexibility. Your clients can even take loans on their balances as needed.

Work with your small business clients to figure out what they want to accomplish—what benefits make the most sense and do they comply with in-state requirements? Timing is an important factor, given state deadlines. Some plans can be established in just five days, giving clients confidence in meeting those deadlines. Additionally, small businesses should consider the employee onboarding process for their sponsored plan of choice. As companies may need further training or internal resources to support their employees on whatever type of plan is chosen. Many private providers offer specialty services for onboarding and counseling employees.

SIMPLEs and Solo 401(k)s are among the options that your clients are competing with versus what other employers offer. Most small businesses are facing stiff challenges in finding high quality labor.[3] A solid retirement program that compares well with traditional 401ks could make a difference by helping them up their game to attract talent. It is an incentive that also helps employers assist in their employees’ work / life balance. In many provider models, it is you, the local advisor, who helps with enrollment, electronic access and ongoing administration, coordinates group Zoom meetings, and provides training and other support. This puts you front and center in positioning your practice to provide solutions to these businesses and the related individuals that may have questions around managing risks or retirement planning.


Employee retirement plans are now more accessible to, and affordable for, small employers than ever before. Turnkey features, streamlined administration, and the additional benefits offered to employees helps build not only their individual savings, but also company loyalty.

As a final thought, keep in mind that whether your small business clients plan to utilize state-led programs, or partner with private organizations to customize their employee benefits, they should first meet their state’s requirements and weigh the options of what might be best for the size and potential growth ahead for their business.