When it comes to employee benefits, the difference between working for a small business and a large corporation can be the difference between eating at a buffet and dining a la carte: neither are bad options, but one usually offers more choices than the other. Unfortunately, far too many lawmakers in Washington, D.C. fail to understand that small businesses often do not have the resources to offer a buffet of benefits, which can result in high employee turnover. That’s why efforts to overturn a rule that makes it easier for states to set up retirement savings programs will be particularly harmful to small businesses.
It’s important to recognize that the retirement-savings landscape in this country is bleak; the United States currently suffers from a retirement-savings gap of more than $6 trillion, and more than three million households do not have any retirement savings at all. Unfortunately, employees of small firms are no better off as 80 percent of workers employed by businesses with fewer than 25 employees do not have any sort of pension or retirement plan.
Now, Congress may make matters even worse: The U.S. House of Representatives recently adopted two resolutions that would overturn a U.S. Department of Labor rule that makes it easier for states to establish retirement savings plans for private sector workers.
If that rule is struck down, it will have a chilling effect on states like California, Illinois and Oregon that are establishing their own retirement savings programs, which in turn would be harmful to small businesses and their employees.
Repealing the Department of Labor rule also runs counter to what small businesses want. Small Business Majority’s scientific state opinion polling found the vast majority of small employers believe most of their state’s residents will not have enough saved for retirement and are concerned their employees are also unprepared for the future.
Since the majority of small employers are concerned that their employees will not have enough saved for retirement, they overwhelmingly support state efforts to establish state-administered retirement savings programs like the Secure Choice Savings programs in Illinois, California and Oregon. These programs assist private-sector workers who do not otherwise have access to an employer-sponsored retirement plan by offering access to a voluntary, safe, affordable, portable retirement savings program that is fueled by direct payroll contributions into an individual retirement account. Some employers would be automatically enrolled, but any firm may choose to join and anyone can opt out at any time.
Small employers need retirement savings options for their employees that make sense for their business as well as their bottom line, and state-administered retirement savings programs can help many small business employees better save for their futures. That’s we we strongly believe states should be allowed to decide for themselves whether to implement these types of programs and how best to administer them. Lawmakers should uphold the Labor Department’s rule and allow states to decide how best to serve their own small businesses and private sector workers.