The Center for Retirement Research at Boston College published its 2023 Small Business Retirement Survey to better understand why smaller firms do or do not offer retirement savings plans.
Why it’s important: The coverage gap is a pressing concern for the nation’s retirement income security, and the gap is driven by small employers.
- Small employers (firms with fewer than 100 employees) account for the vast majority of businesses and 35 percent of private sector workers.
- But only about half of small employers offer a retirement plan for their employees.
- Firms that believe retirement plans help with hiring and retention are much more likely to offer a plan now or in the near future.
- The main barriers to offering a plan are concerns about the stability/size of the firm and the perceived costs of a plan.
- Concerns about costs are driven by misperceptions; many firms are unaware of lower-cost options for employers and tax credits.
- The recent growth of state-sponsored retirement programs may encourage firms without a plan to offer one.
Bottom line: The results suggest that many firms overestimate the financial and time costs required to offer a plan and that better awareness of lower-cost plan options for employers and tax credits could help move the needle on the coverage gap.