Small-and medium-sized businesses make up 99.7% of American businesses, with nearly 29 million businesses employing 56 million people. But only 40% of full-time employed Americans have the opportunity to participate in an employee-sponsored retirement savings program.
Pew Charitable Trust shows that an auto-IRA option is the most appealing for SMBs looking to provide their employees. With 27% of SMBs strongly supporting and 59% somewhat supporting auto-IRA plans - that’s a total of 86%.
Since auto-IRAs are favorable among SMBs, what features do they like? Flexibility is a major component that employers want for their employees. That includes the ability for employees to opt out, to change their contribution amounts (or stop them all together) at any time, and to withdraw funds without consequences at any time.
From the employer's perspective, they want to be free of legal responsibility for retirement accounts, exempt from contributing to employee savings, and to simply withhold funds from pay and submit it to retirement accounts.
The other feature surrounds the default amount employees would contribute, with 3% and 6% of income both favorable.
Overall, SMBs are in favor of auto-IRAs as long as their businesses are protected legally and from incurring additional costs, and if their employees aren’t forced to participate or locked into anything. The ability to be in control is paramount.