Filling the Market Gap for Small Business 401(k) Plans

Filling the Market Gap for Small Business 401(k) Plans

It is widely known that not all companies offer a 401(k) plan, but do you know how many small businesses are actually affected by this? Oh, there are MANY. The New York Times published an article last month called “Tailoring Retirement Plans to Companies with a Handful of Workers” that discusses the market gap between large companies with retirement plans and small companies with retirement plans (or in the latter case, without). Here are two interesting statistics from the article:

  • Only 14% of businesses with 100 or fewer employees sponsor a retirement plan
  • Employees at those small companies, with 50 employees or less, pay administrative fees that are twice as high on average as those paid by participants in larger plans

Small businesses are the key source of jobs in the United States, as they’ve been generating 65% of net new jobs since 1995. Unfortunately, the majority of them do not offer a retirement plan, as the numbers above indicate. Due to this huge gap, there is a need now more than ever for a retirement plan that accommodates small businesses. This opens up the market to different players in the industry, such as ForUsAll.

The New York Times also discusses how small retirement plans that only have a handful of participants are not profitable for big companies, such as Fidelity and Charles Schwab. Their plans are often too costly for those who have lower than a certain number of assets (ranging from $10 million to $20 million depending on the company) or they charge high administrative fees that small businesses cannot afford. If they won’t help small businesses then who will? ForUsAll (they said it, not us).

To read more about how the industry is starting to fill the gap for small businesses with no 401(k)s, check out the New York Times article.