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Small businesses lag on offering retirement plans, coverage gaps widen
Research cited by HousingWire found only 49% of firms with fewer than 50 employees offer retirement plans, leaving about one third of households relying on Social Security at retirement.
Only about half of U.S. private-sector workers participate in an employer-sponsored retirement plan at any given time, with the coverage gap driven mainly by small employers, according to research from the Center for Retirement Research at Boston College, cited by HousingWire. The study found that more than 90% of larger employers offer retirement plans, while just 49% of firms with fewer than 50 employees do so. Because small businesses make up most U.S. firms and employ about one third of private-sector workers, researchers said roughly one third of households end up completely reliant on Social Security at retirement, while others cycle in and out of plan coverage and accumulate only modest 401(k) balances.
Small employers, HousingWire reports, consistently cite three barriers: concerns about firm size and financial stability, perceived costs and administrative complexity, and employee preferences for wages over benefits. The Boston College brief argues those fears can be based on misperceptions, noting that some 401(k) providers offer options with annual employer costs of less than $2,000 for a firm with five employees and less than $3,000 for a firm with 25 employees.
The research also highlights a policy gap in awareness, saying most small employers do not know they can claim a tax credit of up to $5,000 per year for three years to help offset the costs of starting a plan. According to the brief, about 80% of employers say such a credit would make offering a plan more attractive.