Small employers urge Congress to act on retirement

In addition to the cost incurred in offering retirement savings plans, the administrative burden is considerable as well, several people at the hearing said. 

Ray Rucksdashel, chief financial officer with Houston-based Quest-Tec Solutions, testified that while his company supports 401(k) plans, administering them is so complicated that his company contracts with a professional employer organization to help it with administration of its retirement benefit.

"In my view, administrative complexities of the 401(k) plan administration are the biggest obstacles to small businesses offering employee retirement services," Rucksdashel said. "I have 40 years of experience in financial operations in small companies, and I don't have the time or the experience to manage 401(k)s. They are just too complicated."

Rucksdashel acknowledged that while he saw the need for regulatory standards, the current system places too much of a burden on employers. 

"Congress should look at ways to both encourage smaller companies to offer retirement benefits to their employees and at the same time look to simplify and streamline the administration of such benefits," he said." Education, outreach, and improvement to access of retirement programs like the 401(k) is very important."

Collinson said the MEPS model could help ease administrative burdens considerably for small businesses owners. 

"Conceptually, it is a group plan with a plan sponsor … who is well-versed in retirement plans that can handle the fiduciary and administrative duties and take that off the small-business owners' shoulders," she said.  "To facilitate the offering of those types of plans and then even a tax credit for joining it could help go a long way towards inspiring plan sponsorship among the smallest of companies."

According to Paula A. Calimafde, who represented the Small Business Council of America and the Small Business Legislative Council at the hearing, auto-enrollment and auto-escalation feature of retirement plans have been generally accepted by workers. She said studies show that plans that have auto-enrollment and auto-escalation of up to 6 percent see very few employees opting out.

"It is easier to just stay in than take active steps to get out," Calimafde said. "As auto-escalation increases, the amount that employee is putting in on this automatic basis, the data is startling. People just let the amounts keep building up, so even at a 6 percent contribution level … they just stay in and let the 6 percent go in. And putting in 6 percent into your plan and letting it grow tax-free is a very good way to save for your retirement."

Framing the issue

With Congress likely to continue to focus on the economy and job-creation, Luetkemeyer said the hearing was helpful in framing the issues that small employers are facing. 

Although the House Small Business Committee does not propose legislation, he noted that it reports to the Ways and Means Committee, which could address the issue with legislation at some point soon. Hearing from small businesses about their challenges in this area is helpful to policymakers, he said.

"Many small businesses look at their employees as part of their family," Luetkemeyer said. "They want to make them feel like part of the company, and feel like they're appreciated. (Offering retirement benefits) is something they want to do; it's just a question of whether they can afford to do it."

See also:

• Behavioral techniques goosing retirement savings
• Why is the 401(k) industry getting such a bad rap?
• The 7 hottest 401(k) trends for 2014