PLANADVISER - September/October 2019 - 24

Effectively
Serving
Small
Solutions
Delivering profitable
service to small
clients is possible
T
he popularity of legislation aiming
to expand retirement plan coverage
to more small-business employees
and to the self-employed directly
reflects the seriousness of the retirement
plan coverage crisis that confronts
these substantial sectors of the
U.S. workforce.
As noted by Roger Ferguson, CEO of
TIAA in New York City, there are three
components to the retirement crisis-
a coverage gap, a savings gap and a
guaranteed income gap.
Among employees offered a workplace
retirement plan, the system
functions quite well, especially as to
the first two components, says Lew
Minsky, president and CEO of the
Defined Contribution Institutional
Investment Association (DCIIA) in
West Palm Beach, Florida.
" But we have to continue closing
the retirement savings coverage gap, "
Minsky says. " We need to broaden
the pool of people who have access to
workplace retirement savings plans. "
DCIIA is a strong supporter of a
number of different solutions to the
coverage gap, but Minsky says the
" open " multiple employer plan-or open
MEP-idea is particularly exciting.
" In our experience, there is nearuniversal
agreement that open MEPs
are a good idea, so this is an idea whose
time has come, " Minsky says. " We just
need to get it done, with the support of
the government or without. "
Minsky suggests that an " and, and,
and " approach will be best here, and he
mentions extending coverage to parttime
workers and considering statebased
savings opportunities, as well.
Today, roughly half of Americans
are offered a workplace retirement
plan, Ferguson says. This means that
those without one will be totally dependent
on after-tax savings and Social
Security, which he contends will not
be enough. For that reason, employers
of all sizes that currently do not offer a
plan need to seriously consider doing so,
he advises. Employers have numerous
pathways by which to implement
retirement benefits, he observes; the
key is to make the commitment, based
on the understanding that providing
a plan helps both the employer and
those employed.
Cost Misconceptions
And 401(k) Myopia
Data gathered by SCORE, a nonprofit
provider of consulting services to
U.S. small businesses, show that 34%
of small-business owners have no
formal retirement savings strategy,
even for themselves let alone for their
employees. Also troubling, the smaller
the staff a business has, the less likely
it is to have a retirement plan for its
employees. Indeed, only 28% of businesses
with fewer than 10 employees
offer those employees a retirement
plan, while 51% of businesses with 10 to
24 employees do.
According to SCORE, 71% of businesses
without a retirement plan
reported that plan setup is too expensive,
and 63% said they have inadequate
resources to pay for plan
administration. Half contended their
employees are not interested, although
SCORE found that 48% of employees
who had recently left a job said a lack
24 | planadviser.com September-October 2019
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PLANADVISER - September/October 2019

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