Many small-business owners are on board with the idea of providing a retirement plan to their employees. They can see the recruitment and retention perks as well as the potential tax benefits that retirement savings plans bring to both employees and their business.
However, a variety of factors often deters employers from putting a plan into action.
According to a 2016 survey conducted by the Pew Charitable Trust, small-business owners cited the cost of setting up a retirement plan and a lack of resources to administer a plan as the top two reasons for not having one. According to the Bureau of Labor Statistics, approximately 45% of companies with fewer than 100 employees provide retirement plans, compared to 90% of businesses with more than 100 employees.
So how can owners of growing businesses provide what is now considered an essential employee benefit despite the regulatory, financial, and administrative challenges? New solutions are emerging that aim to provide the relief and opportunities many are looking for.
The Benefits of Benefits
Most employers are aware of the significant benefits to offering employee retirement plans. Nearly 70% of employers leverage retirement benefits to attract new hires, and 57% use retirement plans to earn the loyalty of current employees.1
For small-business owners, retirement plans help level the playing field with bigger companies when it comes to competing for talent and rewarding their employees. But the benefits of retirement plans go deeper than simply improving a benefits package. Employer-sponsored retirement plans can make a material difference in employee productivity, financial well-being and even mental health.
Sound like a tall order? Not when you consider that 60% of workers say they're worried about saving for retirement.2 The same research found that employees' financial stress permeates the workplace, affecting employee morale, causing increased absenteeism and leading to a lack of focus on the job.
The benefits extend beyond employee recruiting and well-being. Offering a retirement plan can also mean significant tax benefits. The IRS allows small-business owners to claim a tax credit for ordinary and necessary costs of starting a retirement plan, such as set-up costs and employee education costs. In addition, employer contributions to employee retirement plans are tax deductible, which lowers a company’s overall tax burden.
Innovation Leads to Access
Even with these benefits in mind, administrative and regulatory requirements have traditionally put a retirement plan out of reach for some businesses. Large corporations have extensive staff to deal with the heavy administrative lift—but added staff and administrative responsibilities aren’t always a possibility for smaller companies.
Fortunately, some providers have evolved their retirement products to better serve this end of the market. Implemented correctly, these solutions offer smaller companies the ability to provide big company benefits to their employees, but on tighter budgets and with streamlined administration.
Even better, certain products are designed to reduce the business owner’s fiduciary liability by shifting investment decisions and many administrative responsibilities to third parties.
A Partnership that Paves the Way
Morgan Stanley understands the unique needs, challenges and complexities of retirement plan administration. In response, Morgan Stanley has teamed up with Ascensus to offer the ClearFit retirement plan. This innovative plan makes it simple for employees to invest for their future, has built-in features to help business owners manage their fiduciary risk and reduce administrative responsibilities, and offers clear and transparent pricing so it’s easy to forecast and validate plan costs.
With ClearFit, Morgan Stanley serves as the ERISA 3(38) investment manager fiduciary, taking on responsibility for the selection and monitoring of plan investments. In addition, to help employees easily choose investments, target date models are used to provide individuals with investments that are aligned with their goals and designed to progress with them throughout all stages of life.
Ascensus, the nation’s largest independent retirement plan and college savings services provider, delivers recordkeeping and administrative services using a high-tech, high-touch approach to help keep plans compliant and running smoothly.
The result is that growing business owners now have access to retirement plan features and services that may have been previously out of their reach. This enables them to keep their focus where they want it—serving their customers and clients.
To find out more about ClearFit, talk to us today.