Businesses that offer great benefits may be more likely to attract better employees. But when it comes to providing employees with retirement plans that small-business owners can afford, options can be limited. However, that may start to change.
The recently passed SB 1234 California Secure Choice Retirement Savings Program provides small-business owners in California with the ability to offer their employees and themselves a retirement plan that doesn't cost the employer anything. If California governor Jerry Brown signs it, this new bill will provide employees with a portable, state-run retirement savings plan. Contributions will be automatically deducted from paychecks without a cost to the employer.
“Due to changes in the economy, retirement has become an increasingly important factor for attracting high-quality employees, but many small-business owners have found barriers to offering such plans, including cost, time and paperwork,” says Mark Herbert, California director for Small Business Majority.
—Ann Vanderslice, benefits and retirement planning specialist
“The California Secure Choice Retirement Savings Program [which will require companies with five or more employees to take part] will help address this issue,” Herbert continues. “Employers won't have to set up the program, contribute to funds or take on any fiduciary responsibilities, which means small-business employees can start saving for retirement without significant burdens or risks being placed on their employers.”
Retirement Plans May Attract Great Employees
“The ability to access a retirement plan for employees is a relief for owners, because most want to offer a plan, but don’t have the expertise, time or resources to implement,” says federal benefits and retirement planning specialist Ann Vanderslice, who is currently investigating options for offering a retirement plan to her employees. “Small-business owners also know that given the choice, employees seek meaningful work as well as benefits that enable them to reach their short and long-term goals. A portable retirement plan is a win-win for the small business recruiting the best talent.”
Cyber security expert Scott Spiro, CEO of Computer Solutions Group, Inc., notes that having an excellent team is important to running a small business. “We as business owners have a moral responsibility to take care of our employees,” Spiro says. “When starting out, this is tough, but having a competitive benefits program to offer prospective hires helps you compete for the best and brightest in the workplace.”
More States May Be Looking Into Accessible Retirement Plans
Though there is much to be done in this area, states around the country are looking into ways of using the efficiencies of public retirement systems to administer new types of pension plans for private-sector workers, according to retirement income planning specialist Alexander Joyce, president and CEO of ReJoyce Financial LLC.
“In addition to California’s state-run retirement plan for workers at companies that don’t offer retirement benefits, Colorado considered a similar idea in May , but decided against it," says Joyce, "and New Jersey and Washington have opted instead for programs with very limited state involvement. However, Connecticut, Oregon, Maryland and Illinois are moving forward with their own state-run retirement programs and are looking to California as an example.”
Options for States Without Formal Retirement Plans
There are other options available when it comes to retirement plans, but they tend to cost more, notes Spiro. “Professional Employer Organizations (PEOs) are certainly an option, as they can offer great alternatives for 401K and healthcare plans that are normally reserved for much larger enterprise firms. Another option is to simply go directly to a low-fee investment firm for 401Ks and other financial products.”
While programs like Secure Choice may help make retirement plans much easier for small businesses and their employees, small-business owners in states without similar programs still have options, notes Herbert. “Small Business Majority hosts weekly webinars for small-business owners across the country who need help sorting through the various retirement options.”
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