Small businesses are often approached by payroll providers, insurance companies and other financial services firms with proposals to set up 401(k) plans for their employees. \u00a0But many business owners shelve the idea, due to a lack of interest among their employees, as well as concerns about the cost of establishing and maintaining a plan.<\/p>\n
As a result, while the number of small businesses (with 50 or fewer employees) offering 401(k) plans has increased over the past few years, the share of those doing so is still only about 1 in 4.<\/p>\n
Retirement plans typically take a back seat to salary, benefits like health insurance and other more tangible or immediate perks. \u00a0Yet when it comes to recruiting and retaining employees over the long term, not having a retirement plan can be a relative disadvantage. \u00a0According to one small business CEO, \u201cIt\u2019s like restrooms in the office; you can\u2019t not have them.\u201d<\/p>\n
Importantly, a company-sponsored plan is also the most effective way for small business owners to save for their own retirements.<\/p>\n
Fortunately, over the past few years technology has made small business plans much less expensive to set up and maintain, more cost-transparent, and far easier to manage. \u00a0In addition, the proliferation of so-called “open architecture” (think: modular, or unbundled) technology platforms means business owners can now choose their own plan service providers (custodian, record keeper, administrator, and advisor), and avoid the expensive, inflexible bundled solutions pushed by the payroll and insurance companies. \u00a0Each service provider can be held to “best in class” service standards. And, if necessary, they can quickly be replaced if they don’t deliver as promised, without having to up-end the entire plan.<\/p>\n