Auto-Enrollment Retirement Plans Better for Workers and Small Businesses

New Report Finds Too Few Small Firm Employees Have Retirement Plans

Dallas, TX - The economy and changes in retirement plan options have made it difficult for small businesses to offer employer-sponsored retirement plans for employees, according to a joint report from the National Center for Policy Analysis (NCPA) and PostPartisan Foundation for The Campaign for Economic Security

According to the report -- Small Business and Employee Retirement Savings Plans -- surveys show that small business owners are concerned about the administrative costs of providing a 401(k)-type retirement plan, not being able to afford a company match, or lack of interest from their employees.  Only one-third of firms with fewer than 25 employees sponsor retirement plans, compared to about 80 percent of firms with 100 or more employees. 

 "Workers with smaller firms are even less likely to have access to an employer-sponsored 401(k) or other defined contribution retirement plan." said author and NCPA Senior Policy Analyst Pamela Villarreal.

Specific public policy changes would make it easier for small businesses, said Villarreal. One is to allow them to auto-enroll their workers into traditional IRA accounts, making it more likely that employees will stay enrolled in the system.

"An auto-enrollment option for IRA plans would be an enormous asset because employers would have no fiduciary liability, and would not have to make matching contributions, making the plans simple and more cost-effective for small businesses," said Villarreal.  "Businesses currently receive a tax credit for the first three years they provide a retirement plan.  Lawmakers should consider making this tax credit permanent or allowing a choice between the current flat credit and a ‘per participant' credit."

"Now more than ever, employees are faced with the challenge of taking ownership of a significant chunk of their retirement income. The more employers can encourage retirement savings among their workers through auto-enrollment programs, the better prepared workers will be at retirement."


About the National Center for Policy Analysis
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care; Medicare and Social Security; retirement; taxes; small business policy; and energy and environmental regulation.

About PostPartisan Foundation
PostPartisan Foundation is the first truly post-partisan think tank and idea lab designed to develop, test, advocate, and enact reforms and innovations that work in the public, private and non-profit sectors. Post is launching the Campaign for Economic Security, with support from AARP, to work across party lines to develop innovative new ways to help Americans save for retirement in the wake of the economic crisis.