Proposals in front of Congress would expand Multiple Employer Plans, giving small business owners more options for employee retirement plansThe biggest advantage of offering a retirement plan to employees: “It’s the right thing to do,” employers said
December 13, 2018 — GREENWOOD VILLAGE, Colo.–(BUSINESS WIRE)–Sixty-six percent of small business owners who do not offer a retirement plan today are likely to consider an open Multiple Employer Plan (MEP), according to a new survey1 from Empower Retirement. Open MEPs are defined contribution plans sponsored by more than one unrelated employer. Two separate proposals, one in the U.S. House and one in the Senate, would broaden the scope of open MEPs by allowing more small businesses to band together to offer a retirement plan.
Small business owners’ interests in open MEPs are piqued over potentially lowering the costs to their organizations and lowering fees to employees in a workplace retirement plan offering, survey results show. Almost all of the business owners who expressed interest in open MEPs said the biggest advantage in offering their employees a retirement plan is “it’s the right thing to do.” Additionally, 59 percent of employers interested in open MEPs said other advantages to offering retirement plans would be employee retention and attracting talent.
Is Small Business Too Small For a Plan?
However, among the top reasons why small businesses don’t offer a retirement plan to employees is because their company is too small, survey respondents said. “Broadening terms to allow even more small businesses the opportunity to offer workplace retirement plans potentially puts more employees on a path to building their retirement savings,” said Edmund Murphy III, President of Empower, the nation’s second-largest retirement plan record keeper by total participants.2
Empower’s survey also reveals that 50 percent of small businesses associate open MEPs as coming with help from financial professionals. “We have developed an advisor-centric model that is very important to us and to employers,” Murphy said. “We see the evolution of open MEPs as an opportunity to serve the small end of the market and for advisors to provide financial services to a new audience, which has shown great interest in offering retirement plans to their employees.”
A new paper by the Empower Institute “Open MEPs: A promising way to narrow the coverage gap” lays out more details from the survey.
Making MEPs More Accessible
Under the legislative proposals, open MEPs would allow unaffiliated small employers without the ability to administer their own plans to enroll their employees into professionally managed workplace plans that offer the economies of scale found in the plans large companies offer.
“We support proposed legislation that would make open MEPs more accessible to small businesses and their employees,” Murphy said. “Congress has an opportunity to expand coverage to more working Americans. Open MEPs would be another tool for employers to access that helps workers on the path to retirement readiness and financial freedom.”
The impact of plan access on projected income replacement at retirement is significant. Participants who are eligible for a defined contribution plan and actively contribute have a median income replacement percentage of 79 percent compared to 45 percent for those without access.3
At small businesses in the U.S. with fewer than 100 employees, less than half of workers have access to a defined contribution retirement plan,4 such as a 401(k). But according to the Empower survey, employees are interested in workplace retirement savings plans. Among the small businesses where owners are interested in open MEPs, 39 percent said1 employees had expressed interest in having a workplace retirement plan.
About Empower Institute
Utilizing resources from within Empower Retirement and the academic and policymaking communities, Empower Institute critically examines investment theories, retirement strategies and assumptions, and suggests changes that can achieve better outcomes for companies, institutions, retirement plan sponsors, investment advisors and individual investors. Research from Empower Institute is available at www.empower-institute.org.
Headquartered in metro Denver, Empower Retirement administers $570 billion5 in assets for more than 8.7 million6 participants. It is the nation’s second-largest retirement plan record keeper by total participants (Pensions & Investments, April 2018). Empower serves all segments of the employer-sponsored retirement plan market: government 457 plans, small, midsize, and large corporate 401(k) clients, non-profit 403(b) entities, private-label recordkeeping clients and Individual Retirement Account customers. For more information, please visit www.Empower-retirement.com.
1 Empower Retirement Small Business Open Multiple Employer Plan research conducted Sept. 25-Oct. 8, 2018 by Harris Insights and Analytics; 304 small business decision makers completed an online survey. Businesses were for-profit with from 5 to 250 employees and in business for more than one year.
2 Information refers to all retirement business of Great-West Life & Annuity Insurance Company and its subsidiaries and affiliates, including Great-West Life & Annuity Insurance Company of New York, marketed under the Empower Retirement brand. Ranking based on total participant accounts as of 9/30/2018.
3 Empower Retirement conducted a survey of 4,000 American workers ages 18 to 64 in April 2018. The results are encapsulated in Empower’s Retirement Progress Score (RPS), which is a numeric estimation of the percentage of working income that American households are on track to replace in retirement. The Empower Institute survey findings are available in a white paper called “Scoring the Progress of Retirement Savers.”
4 Data is from the Bureau of Labor Statistics, Oct. 2, 2018. www.bls.gov
5 As of Sept. 30, 2018. Information refers to the business of Great-West Life & Annuity Insurance Company and its subsidiaries, including Great-West Life & Annuity Insurance Company of New York. Of the total assets under administration (AUA), $570 represents the AUA of GWL&A of NY. AUA do not reflect the financial stability or strength of a company. GWL&A assets total $60.9B and liabilities total $58.9B. GWL&A of NY assets total $58.9B and liabilities total $2.2B.
6 As of Sept. 30, 2018. Information refers to all retirement business of Great-West Life & Annuity Insurance Company and its subsidiaries and affiliates, including Great-West Life & Annuity Insurance Company of New York, marketed under the Empower Retirement brand.