PLANSPONSOR.com – Small companies (10 – 499 employees) face retirement plan coverage and participation, as well as employee retirement readiness, challenges, a report suggests.
The report from the Los Angeles-based Transamerica Center for Retirement Studies (TCRS), part of the 14th Annual Transamerica Retirement Survey, says 88% of small company workers value 401(k) or similar plans such as SIMPLE IRAs or SEPs as an important benefit, but only 58% are offered such a plan by their employers.
“Small businesses are the cornerstone and growth engine of the U.S. economy. They are represented in all industries and generate a wide range of revenue, earnings, and payroll,” said Catherine Collinson, president of TCRS. “Small businesses’ offering of retirement benefits can positively affect the retirement outlook of the millions of American workers they employ.”
Plan Sponsorship and Coverage for Part-Time Employees
The research looked at retirement benefits offered among small companies (10 to 499 employees), including micro companies (10 to 99 employees) and small non-micro companies (100 to 499 employees) and found 72% of small companies offer a 401(k) plan or a similar employee-funded plan (e.g., SEP, SIMPLE, other), including 71% of micro companies and 89% of small non-micro companies, compared to 95% of large companies (500 or more employees).
Despite the high percentage of small businesses that report offering plans, the findings reveal a gap in plan coverage, namely part-time workers. At small companies, only 36% of part-time workers are offered a 401(k) or similar plan, compared to 68% of full-time workers. This coverage gap also persists among large companies in which 90% of full-time workers are offered a plan, compared with only 51% of part-time workers.
“Much of the public policy discussion around retirement security has focused on encouraging more small employers to offer a plan,” said Collinson. “However, it is critical to note that plan sponsorship is not synonymous with plan coverage.”