Why Retirement Plans Can Make Sense for Small Businesses
A small-business-sponsored retirement plan has the potential to provide significant benefits, current tax savings, and a more financially secure future for both small business owners and their employees.

Many workers accumulate the majority of their retirement savings through retirement plans sponsored by their employers. However, a study by The Pew Charitable Trusts found that more than 40 percent of full-time employees at small- and medium-sized businesses do not have access to an employer-sponsored plan.1 As a result, these workers may face the prospect of having inadequate savings at retirement.

The Pew study also found that while employers want to help employees save for retirement and generally support offering retirement benefits, they cite the expense and administrative resources required to maintain such a plan among the obstacles that prevent them from doing so.1

In addition, some small business owners don’t see the need for a retirement plan for themselves. They believe their business will fund their retirement.

Below are some of the common misconceptions about establishing a small business retirement plan and how OppenheimerFunds may help small-business owners and their employees create a potentially more secure retirement.

Small Business Owners Think a Retirement Plan is Too Expensive

A small business retirement plan administered by OppenheimerFunds requires no plan installation fee at set up or annual plan administration fee.  All fees are paid by plan participants.  The annual administration fee for maintaining an account is a maximum of $30 per participant, with the option to be waived to $0 if the participant maintains an account balance of $50,000 or more.2    

Small Businesses Lack the Resources Needed to Administer a Plan

Small business owners are concerned that retirement plans will be too much of an administrative burden and a drain on resources. OppenheimerFunds offers a suite of small business retirement plans created by the Internal Revenue Service (IRS) specifically with the needs of  small business employers in mind.  Depending on the plan option selected, little to no administrative efforts are required on the part of the employer. OppenheimerFunds’ strong track record of customer support and experience can help make the process even smoother. With advancements in technology, contributing to these plans can be as easy as an automatic bill payment.  Learn more about Contribution Processing System (CPS).

Low Employee Interest

Small business owners may perceive a lack of employee interest in retirement plans.  But when employees have access to a retirement plan and are educated on the potential financial benefits of participating, they will likely enroll in the plan.  In addition, studies have shown that many employees cite a retirement plan as one of the primary benefits they seek when deciding to take a job.

Employer Contribution Requirements

The employer contribution requirement varies by plan.  For example, the Payroll Deduction IRA is an employee- only funded plan.  While some plans, such as e Simplified Employee Pension Individual Retirement Arrangements (SEP IRAs) and Profit Sharing  are employer-only funded plans, annual contributions are not mandatory and percentages may vary each year.

My Business will Fund My Retirement

Having access to retirement savings enables small business owners to further diversify their retirement savings planning strategy, and may allow for flexibility to transition to retirement on their terms.

Be sure to explain the benefits a retirement plan can offer to your small business clients and help them understand how simple it is to establish and maintain a plan.

 
  1. ^Source: “Small Business Views on Retirement Savings Plans,” The Pew Charitable Trusts, January 2017.
  2. ^The Fee will be waived for each retirement product maintained if the total investment value in Oppenheimer funds retirement and/or non-retirement accounts, excluding OppenheimerFundsdirect-sold 529 plans, is $50,000 or more.