Business Services Industry

Small firms miss big news

Workforce, June, 2002 by Carroll Lachnit

Small companies have their advantages, but one downside is that only 34 percent of firms with 100 or fewer employees offer an employment-based retirement plan. That's compared to 64 percent of medium- and large-sized firms, according to the U.S. Department of Labor.

A new survey of small employers found that most of them are unfamiliar with the Economic Growth and Tax Relief Reconciliation Act, which was signed into law last year and has a number of important incentives for retirement-plan sponsors.

Sixty-eight percent of companies that sponsored plans and 86 percent of companies that did not sponsor plans were unfamiliar with the law, which has such provisions as a tax credit of up to 50 percent for the start-up costs of establishing and administering a new retirement plan, says Dallas Salisbury, president and CEO of the Employee Benefit Research Institute. The institute sponsored the survey, along with the American Savings Education Council and the market research company Mathew Greenwald & Associates.

As you might expect, the vast majority of small companies surveyed seemed to be working without an in-house human resources person, says Ruth Helman of Mathew Greenwald & Associates. The surveyors asked to speak to whoever in the company was responsible for making decisions about retirement plans, and in both the plan-sponsoring companies and those that had no plan, 74 percent or more of the respondents had such titles as owner, president, CFO, or accountant, Helman says.

Twenty-two percent of the companies without a retirement plan said that the most important reason for not offering one was that employees preferred wages and/or other benefits to having a plan. Of the companies that offer plans, 30 percent said the most important reason to have one was the competitive advantage in employee recruitment and retention. The most important factor for 23 percent of the companies was the positive effect the plans have on employee attitude and performance.

For more on the employment survey, go to www.ebri.org/sers/2002. For an overview of the 2001 law's impact, prepared by Hewitt Associates LLC, go to http://was.hewitt.com/hewitt/resource/wsr/2001/egtrra.htm.>