Small-Business Owners Report Greater Trust in Financial Services Companies over Associations or Government Entities to Provide Retirement Plans
SIMSBURY, CT, April 1, 2019 – According to a recent survey sponsored by the SPARK Institute and conducted by Cerulli Associates, small U.S. employers overwhelmingly trust the financial services sector for its expertise more than the public sector when it comes to administering financial assets and retirement savings programs.
Survey participants ranked third parties, including local or state government, associations such as the U.S. Chamber of Commerce, and large financial services firms. Research findings suggest that retirement plan providers are favored over state and governments for administering retirement plans. The majority, 89%, of respondents indicate a high level of trust in retirement plan providers, compared to 53% for state governments.
The research also evaluated employer knowledge of state-run programs, like those established in California and Oregon. State-run programs―if set up correctly―can be cost effective, and simple to administer for employers. They also have the strength of the law behind them to compel coverage. However, they offer limited savings capabilities and raise concerns about uniformity from one state to the next.
Multiple employer plans (or MEPs) can provide simplified administration and lower costs for smaller employers while providing higher savings rates. These plans require the employer to take on the fiduciary duty to select and monitor the MEP.
Individual plans, such as 401(k)s, are a proven success, enabling millions of Americans to save trillions of dollars for their future. While individual plans come with higher levels of employer responsibility and fiduciary duties, these plans allow employers customization to suit their workforce and achieve organizational and employee benefits goals, such as attracting and retaining talent and ensuring that employees can transition to retirement when they want.
“Our findings show that the proposed coverage solutions are not mutually exclusive,” explains Tim Rouse, Executive Director of the SPARK Institute. “State-run programs, MEPs, and individual plans all have appealing qualities to employers at different stages of their growth. An effective retirement system provides alternatives to U.S. employers and gives them the ability to move easily from one program to the other as their workforce changes and evolves.”
SPARK believes that covering all working Americans with a retirement plan is an important priority and an achievable goal for our country. With several legislative proposals on the table for how to best achieve this goal and help more small employers offer a plan, SPARK conducted this study in order to test each one for its potential effectiveness and identify to which segments of the workforce each plan type might appeal the most. Our research reinforces the need for Congress to pass legislation such as the Retirement Enhancement and Savings Act (RESA), which would complete the spectrum of coverage options and allow employers to participate in open MEPs, and other measures that enhance the overall retirement system for all Americans.
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