How Do Employers Feel about State Retirement Expansion Ideas?
The Pew Charitable Trusts recently published a report
reviewing the findings of a survey to gauge employer reactions to leading state retirement policy ideas where they found strong support among small and mid-size businesses for automatic IRA programs, multiple employer plans (MEPs) and online marketplaces.
Pew’s survey of over 1,600 small and medium-size private-sector businesses (those with five to 250 employees), some of which sponsor plans, was designed to help better understand the barriers to and motivations for offering retirement plans, and to get employers’ views on policy initiatives.
While the survey was conducted before the Trump administration pulled the plug on the safe harbor for state-run retirement plans for private-sector workers, the issue of expanding retirement savings opportunities, particularly among small businesses, does not appear to be going away anytime soon. In addition, some states are continuing with their efforts; among them are Oregon, California, Washington and Vermont.Auto IRAs
Among the key findings was that nearly 9 in 10 (87%) of small-to-medium employers that do not offer a retirement plan support the concept of an auto-IRA program. Of the businesses supporting auto-IRAs, 76% said they believe that such a program would help their employees. Meanwhile, the 12% of businesses that opposed the approach cited a number of reasons, including the belief that employees should not be automatically enrolled in a plan (44%) and that their employees do not want or need a retirement plan (33%).
When assessing attitudes about auto-IRA programs sponsored by government or private entities, respondents gave much stronger support to sponsorship by a financial services firm as opposed to a government. The results show that 83% supported the idea of the program being sponsored by a mutual fund, while 72% t supported one offered by an insurance company. Support for government sponsorship dropped to 43%, with 37% saying they strongly oppose this approach, the report notes.
In a somewhat interesting response, 52% of businesses without plans said they would start their own if asked to choose between doing so and enrolling workers in a state-sponsored auto-IRA. Meanwhile, only 13% of businesses with plans said they would drop their current offerings to enroll workers in a state program.Other Options
Many employers without plans also expressed willingness to consider other government-promoted options, such as an online retirement plan marketplace or an MEP, the report notes.
A strong majority — 86% — of employers without plans said it would be helpful if state policymakers set up websites where businesses could find information about retirement plans and get price quotes, but that would not require them to select a plan.
Drilling down further to find out whether the availability of a marketplace would make them more likely to offer a plan, the findings drop somewhat, but still come in at 56%. The report notes that several states, including Washington and New Jersey, have taken this approach.
Employers without a plan also expressed strong support for the concept of MEPs, but slightly less support when asked whether they would participate in one. Overall, the report shows that 85% of employers would find a MEP “somewhat or very helpful,” while 61% indicated they would consider participating in such a program.
When asked about specific elements of a MEP, most businesses without a plan strongly or somewhat supported each of them. For example, the report shows that:
- 92% liked the idea that the plan would allow employees to have choices in how their contributions are invested;
- 86% support the idea that employers would have less legal liability than they would if they operated their own plan; and
- 87% support allowing both employers and employees to make contributions.
The survey found somewhat lower levels of support for the concept of a group plan sponsored by the state treasurer’s office (55%) or the state handling record-keeping, financial reporting and communication for the plan (57%). Pew notes that these features “may suffer from anti-government sentiment similar to that expressed when these business representatives were asked about auto-IRA sponsorship.”