Empower Retirement: Small Business Owners Show Great Interest in Open Multiple Employer Plans
Proposals in front of Congress would expand Multiple Employer
Plans, giving small business owners more options for employee retirement
plans
The biggest advantage of offering a retirement plan to employees:
“It’s the right thing to do,” employers said
GREENWOOD VILLAGE, Colo.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/401k?src=hash” target=”_blank”gt;#401klt;/agt;–Sixty-six percent of small business owners who do not offer a retirement
plan today are likely to consider an open Multiple Employer Plan (MEP),
according to a new survey1 from Empower Retirement.
Open MEPs are defined contribution plans sponsored by more than one
unrelated employer. Two separate proposals, one in the U.S. House and
one in the Senate, would broaden the scope of open MEPs by allowing more
small businesses to band together to offer a retirement plan.
Small business owners’ interests in open MEPs are piqued over
potentially lowering the costs to their organizations and lowering fees
to employees in a workplace retirement plan offering, survey results
show.
Almost all of the business owners who expressed interest in open MEPs
said the biggest advantage in offering their employees a retirement plan
is “it’s the right thing to do.” Additionally, 59 percent of employers
interested in open MEPs said other advantages to offering retirement
plans would be employee retention and attracting talent.
However, among the top reasons why small businesses don’t offer a
retirement plan to employees is because their company is too small,
survey respondents said.
“Broadening terms to allow even more small businesses the opportunity to
offer workplace retirement plans potentially puts more employees on a
path to building their retirement savings,” said Edmund Murphy III,
President of Empower, the nation’s second-largest retirement plan record
keeper by total participants.2
Empower’s survey also reveals that 50 percent of small businesses
associate open MEPs as coming with help from financial professionals.
“We have developed an advisor-centric model that is very important to us
and to employers,” Murphy said. “We see the evolution of open MEPs as an
opportunity to serve the small end of the market and for advisors to
provide financial services to a new audience, which has shown great
interest in offering retirement plans to their employees.”
A new paper by the Empower
Institute “Open MEPs: A promising way to narrow the coverage gap”
lays out more details from the survey.
Under the legislative proposals, open MEPs would allow unaffiliated
small employers without the ability to administer their own plans to
enroll their employees into professionally managed workplace plans that
offer the economies of scale found in the plans large companies offer.
“We support proposed legislation that would make open MEPs more
accessible to small businesses and their employees,” Murphy said.
“Congress has an opportunity to expand coverage to more working
Americans. Open MEPs would be another tool for employers to access that
helps workers on the path to retirement readiness and financial freedom.”
The impact of plan access on projected income replacement at retirement
is significant. Participants who are eligible for a defined contribution
plan and actively contribute have a median income replacement percentage
of 79 percent compared to 45 percent for those without access.3
At small businesses in the U.S. with fewer than 100 employees, less than
half of workers have access to a defined contribution retirement plan,4
such as a 401(k). But according to the Empower survey,1
employees are interested in workplace retirement savings plans. Among
the small businesses where owners are interested in open MEPs, 39
percent said1 employees had expressed interest in having a
workplace retirement plan.
About Empower Institute
Utilizing resources from within Empower Retirement and the
academic and policymaking communities, Empower Institute critically
examines investment theories, retirement strategies and assumptions, and
suggests changes that can achieve better outcomes for companies,
institutions, retirement plan sponsors, investment advisors and
individual investors. Research from Empower Institute is available at www.empower-institute.org.
About Empower
Headquartered in metro Denver, Empower Retirement administers $570
billion5 in assets for more than 8.7 million6
participants. It is the nation’s second-largest retirement
plan record keeper by total participants (Pensions & Investments,
April 2018). Empower serves all segments of the employer-sponsored
retirement plan market: government 457 plans, small, midsize, and large
corporate 401(k) clients, non-profit 403(b) entities, private-label
recordkeeping clients and Individual Retirement Account customers. For
more information, please visit www.Empower-retirement.com.
1 Empower Retirement Small Business Open Multiple
Employer Plan research conducted Sept. 25-Oct. 8, 2018 by Harris
Insights and Analytics; 304 small business decision makers completed an
online survey. Businesses were for-profit with from 5 to 250 employees
and in business for more than one year.
2 Information refers to all retirement business of
Great-West Life & Annuity Insurance Company and its subsidiaries and
affiliates, including Great-West Life & Annuity Insurance Company of New
York, marketed under the Empower Retirement brand. Ranking based on
total participant accounts as of 9/30/2018.
3 Empower Retirement conducted a survey of 4,000
American workers ages 18 to 64 in April 2018. The results are
encapsulated in Empower’s Retirement Progress Score (RPS), which is a
numeric estimation of the percentage of working income that American
households are on track to replace in retirement. The Empower Institute
survey findings are available in a white paper called “Scoring
the Progress of Retirement Savers.”
4 Data is from the Bureau of Labor Statistics, Oct.
2, 2018. www.bls.gov
5 As of Sept. 30, 2018. Information refers to the
business of Great-West Life & Annuity Insurance Company and its
subsidiaries, including Great-West Life & Annuity Insurance Company of
New York. Of the total assets under administration (AUA), $570
represents the AUA of GWL&A of NY. AUA do not reflect the financial
stability or strength of a company. GWL&A assets total $60.9B and
liabilities total $58.9B. GWL&A of NY assets total $58.9B and
liabilities total $2.2B.
6 As of Sept. 30, 2018. Information refers to all
retirement business of Great-West Life & Annuity Insurance Company and
its subsidiaries and affiliates, including Great-West Life & Annuity
Insurance Company of New York, marketed under the Empower Retirement
brand.
Contacts
Stephen Gawlik – 303.737.0899 (office), 617.417.4408 (cell)
Monica
Mendoza – 303.737.2626 (office), 719.373.2460 (cell)
