Orange County Register

Approximately 45% of small businesses do not offer any type of retirement for their employees, and two-thirds don’t offer a 401(k) retirement savings plan, according to SurePayroll, online payroll service for small businesses.

Why do small businesses not offer 401(k)s? SurePayroll identifies six main factors:

1. Small Businesses Are Struggling: 48% of small business owners surveyed by SurePayroll said that the current state of the economy has had a negative impact on their ability to offer pension benefits.
2. Perception of High Expense. While more affordable plans have hit the market in recent years, the perception still remains that 401(k) administration is cost-prohibitive for small businesses. Of those who do not currently offer employees a 401(k) plan, four out of 10 attribute it to the perceived cost of starting and administering the program.
3. Fewer Options for small businesses. Historically, large companies have had many retirement plans from which to choose. But fewer vendors offer retirement plans that are more limited to small businesses.
4. Salaries are Down. Employee salaries were down 0.3% in July, SurePayroll’s Small Business Scorecard, a monthly report on payrolls at 12,000 clients, found. With rising costs for items like gas and groceries, coupled with lower salaries, employees are struggling to save - even if their companies do offer a savings plan. Some small businesses shy away from providing a 401(k) simply because their employees don’t want to participate.
5. Lack of Knowledge Regarding 401(k) Plans. The survey indicates that 66% of respondents felt that offering 401(k) benefits would not attract or retain new employees.
6. Low Returns on Invested Funds. Low stock-market returns are apparently discouraging some business owners (7% in SurePayroll’s survey) from initiating employee retirement savings programs.

If you have a strategy, resource or tip to help small businesses, click here to send it to me. If I use it, I’ll give you credit and link to your Web site.

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