In assessing the current state of 401(k)s and retirement offerings, a new study shows that size counts.
A survey from the Transamerica Center for Retirement Studies shows 46% of small companies offer a 401(k) or a similar retirement plan to their employees, compared to 92% of large companies and 89% of midsize companies.
Those results leave substantial room for improvement for smaller companies seeking to improve their employee benefits. And most intend to do so, according to the study.
Among employers that don’t offer a 401(k) or similar plan, 43% said they’re likely to begin doing so in the next two years, according to the study. Moreover, the study showed 27% percent of employers that are unlikely to offer a plan said they would consider joining a multiple-employer plan, a pooled employer plan or a group of plans.
“Employer-sponsored retirement plans, including 401(k)s and similar plans, have proven to be the most effective way to facilitate long-term savings among workers. Unfortunately, not all workers have access to these benefits, especially those working for small companies,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
The survey illustrates the impact that access to workplace retirement benefits can have. Workers at large companies had saved an estimated median of $96,000 in total household retirement accounts and those at midsize companies had saved $73,000, while employees of small companies had saved just $41,000.
Pre-retirees could also use more of a hand from plan sponsors, especially considering the complex financial decisions they will soon be facing. The study showed relatively few plan sponsors provide access to a financial adviser (44%), education about transitioning into retirement (41%) or educational resources (40%).
“Besides a person’s home, retirement savings represent the largest aspect of most Americans’ net worth,” said Jim Dario, head of wealth management at SageView Advisory Group. “Having a clear understanding of how these assets can and should grow is critical to ensuring that those approaching retirement can live out their dreams in a financially secure manner.”
“A fiduciary adviser can help plan participants with many aspects of their financial lives, including budgeting and debt consolidation, so they can maximize their workplace savings for retirement,” Dario added. “Furthermore, for the majority of workers, the plan may be one of the few opportunities they’ll have to work with a financial adviser.”
Finally, the study showed that 81% percent of employers feel a responsibility to help workers maintain their long-term health and well-being, while 72% cite one or more major concerns about employees’ mental health and 47% have found it difficult to recruit new employees.
One way to help attract those elusive new employees is to improve benefits. Almost two-thirds of employers (64%) say health insurance, retirement benefits and other benefits are very important totheir ability to attract and retain employees.
“In the wake of the pandemic, employers have been navigating complex issues in a rapidly changing environment, especially in managing the needs of their workforce. However, they can be doing even more to support their employees,” said Transamerica’s Collinson.