Small Business Owners Predict a Retirement Crisis

An overwhelming majority of small-business owners say that the country is in the midst of a retirement crisis. The online study, commissioned by Nationwide and conducted by Harris Poll, found that 84% of small business owners say American workers are facing a retirement readiness crisis. However, 60% of small-business owners say that their own employees are on track to retire. Sixty-three percent of small business owners say it’s important for a business owner to provide retirement benefits, but only 34% offer these benefits to their employees.

Small businesses play an outsized role in helping workers prepare for retirement. According to the U.S. Small Business Administration, small businesses make up 99.7% of all employers, employ 49% of all private-sector workers, and create 63% of the new private-sector jobs in the country.

Joe Frustaglio of Nationwide said, “We’ve reached a point in this country where people are starting to pay attention to the fact that a retirement savings problem exists. Employers need to provide access and education, and workers need to take advantage of what’s available to them.”

Sixty-seven percent of small-business owners who offer retirement benefits, including 401(k)s, plan to increase their contribution to employees’ 401(k) plan. Thirty percent of small-business owners who don’t offer retirement benefits plan to offer these benefits in the future. If that happens, 54% of small-business owners will offer their employees retirement benefits.

Half of small-business owners who plan to start offering retirement benefits say they will do so because they expect sales or revenue to increase in the next 12 to 24 months, and 32% say the U.S. economy will improve in the same timeframe. Small business owners who offer 401(k) plans and say they will increase contributions have an even more positive outlook: 56% expect company sales or revenue to increase in the next 12 to 24 months, and 53% say the U.S. economy will improve in that same period.

“In spite of recent market volatility, economic indicators are pointing toward continued growth for the U.S. economy in 2016. Small business owners should see Main Street benefit from the economic stability that we’ve enjoyed during the last few years,” said David Berson, senior vice president and chief economist at Nationwide.

Twenty-five percent of small-business owners who plan to offer retirement benefits in the future say the ACA has made health benefits less attractive to employees, and 18% say the ACA has decreased company health care costs. Thirty-three percent of small-business owners who offer retirement benefits and plan to increase company contributions to their employees’ 401(k) plans say the ACA has made health care benefits less attractive to employees, and 30% say the ACA has decreased the company’s health care costs. “Lower health care costs means small business owners have the option of contributing more to their employees’ retirement.

As the ACA makes health care benefits less relevant to small business employees, business owners have to find a new way to recruit and retain employees. There is mounting evidence that 401(k) plans are filling that role,” said Frustaglio.

Fifty-nine percent disagree that retirement benefits are not important for attracting and retaining employees. Forty-two percent of those who plan to increase contributions say that their company’s 401(k) plan is now more important for attracting and retaining employees as a result of the ACA. Twenty-four percent of small business owners who will offer retirement benefits in the future say their company’s 401(k) plan is now more important for attracting and retaining employees because of the ACA.

“As the health care insurance marketplace becomes more commoditized, employers are looking for new tools to attract and retain key employees, Employers who are using 401(k) plans as a recruitment tool are ahead of the game because we’re seeing more company owners asking how they can do this,” said Frustaglio.

He adds that small business owners who are not offering a 401(k) plan to their employees should talk to a financial advisor about finding a plan that’s right for their employees and business. Eighty percent of small business owners say they cannot compete with a Fortune 500 company’s benefits, and 48% say they could afford a customized 401(k) plan to meet their small business needs.

Frustaglio said, “Small companies not being competitive with large corporations in terms of employee benefits is just not true in today’s world. No matter the size of the business, from one with 33,000 associates like Nationwide to the corner grocery store, today’s 401(k) plans allow for customization and access to the same options with the same tools for all employees.”

Frustaglio recommends that small business owners who offer retirement benefits to their employees do a plan review every year with their advisor. The review should include an analysis of the plan’s components and investment options for their employees.

Healthcare is a Top Concern for Small Businesses

While 76% of small business owners are stable or improving in the economy, more than half have concerns about weaker economic times ahead, according to a survey by Dealstruck. Small business owners agree that the most pressing issues in 2016 are taxes (56%) and healthcare (46%). And while 72% of liberal business owners say that the minimum wage does not affect their business and is too low, a surprisingly high percentage of conservatives agree. Only 20% of conservative business owners say that the $7.25 minimum wage is too high.

Small businesses are generally feeling positive about their own growth and the economy, but are not applying for SBA financing (only 6% of respondents have ever applied), and 57% have concerns about their economic future. Millennial small business owners are faring better (95% are stable or improving), are more likely to have applied for SBA financing (16%), and are less concerned about the economy in the near term (47%).

Small business owners are generally not affected by the Affordable Care Act (ACA) and are not opposed to its continuation. Fifty-three percent say the ACA will not affect their businesses; 18% expect a positive effect; and 45% say it should be maintained (16% have no opinion). Twenty-six percent of Millennials (under 30) say that the ACA has had a positive effect on their businesses. Still, more than half of small businesses don’t offer healthcare to employees

Health Care Costs Are A Major Problem for Small Business

Small businesses are facing huge health care cost increases while struggling to navigate the Affordable Care Act (ACA), according to a survey by the National Small Business Assn. (NSBA). “The smallest businesses are in worse shape than they were just one year ago,” said NSBA president and CEO Todd McCracken. Just 41% of firms with five or fewer employees offer health benefits, down from 46% one year ago.”

Offer rates dropped among all small firms too; 65% of small firms offer health insurance, down from 70% one year ago. One in five said that premium increase exceeded 20% during their most recent renewal. While cost is the number one driver of whether a small business will offer health insurance, complexity and administrative burden cannot be underestimated since the overwhelming majority of small business owners handle their firm’s health benefits. Just nine percent of small-business owners plan to purchase health insurance through the Small Employer Health Options Program (SHOP) exchange or an individual exchange, down from 14% last year. The average small business owner spends as much as 13 hours a month on ACA compliance

Benefits Remain a Key to Retention and Recruitment

Small-business owners looking to recruit and retain top employees need to pay close attention to their benefit offerings, according to a survey by Aflac. A majority of workers employed in small businesses are willing to consider a job with slightly lower pay, but better benefits. Half of potential job-changers say that improving their benefit package could keep them right where they are.

The battle for talent is getting tougher with the unemployment rate at 5.3%. Thirty-four percent of decision-makers expect to hire full-time employees in the next 12 months, and 28% expect to hire part-time employees. The study found the following:

  • 59% of workers at small companies are at least somewhat likely to accept a job with slightly lower pay, but better benefits.
  • 49% of small-business employees who agree, at least somewhat, that they’ll be looking for jobs in the next year say improving their benefit package is one thing their employers could do to keep them in their jobs.
  • 87% of employees agree, at least somewhat, that voluntary insurance is part of a comprehensive benefit program.

Small-business owners appear to be listening. Twenty-two percent of small-business employers offer voluntary insurance compared to 18% in 2014. Small-business employees who are enrolled in voluntary benefits are more likely to be very satisfied or extremely satisfied with their jobs and their benefit packages. They are also more likely to say that their benefit package meets their family’s needs.

Small Businesses Must Gather Data Now for Obamacare 2016 Deadline

Companies with 50 to 99 employees will fall under the federal healthcare mandate starting January 2016, but they should prepare now. Small companies should begin tracking data to help them determine compliance and which employees are entitled to an offer of coverage in 2016. “Unfortunately, no magic bullet exists in the form of affordable software that gathers data in one tidy place; nor is the government ready with a form. The required reporting is detailed. Leaving the record keeping to the 11th hour will be too cumbersome for smaller companies…Planning facilitates developing the best ACA strategy,” says Finny Varghese, an expert on the ACA

Here’s what companies need to do according to Lexus/Nexus:

• Classify workers. Coverage is required for full-time employees, those working 30 or more hours weekly, and full time equivalents. FTEs are calculated as the number of part-time workers multiplied by the number of hours worked per month divided by 120. Companies may discover their total full-time count falls below the range.

• Define standard measurement periods for determining employee classifications. There will be one look-back period for ongoing employees and measurement periods for each new hire. Tracking this year provides a beta test for 2016 data and could guide classifications.

• Detail each employee who gets coverage under current healthcare policy. This information includes the duration of any waiting period, months of eligibility and coverage, premium for the lowest cost option for employee-only coverage, and whether coverage meets the government standard.

Small businesses slow to embrace SHOP exchanges

Small businesses are not flocking to health insurance exchanges set up under the Affordable Care Act in the same way individual consumers are, brokers and business owners say. Though certain small businesses can get tax credits for offering employees coverage through the Small Business Health Options Program, some say choices are too limited and the credits are too low. The Wall Street Journal (tiered subscription model) (1/7)

The right insurance mitigates risk

A variety of insurance options are available to small businesses to protect against potentially catastrophic events. Some of the most important coverages for small businesses include professional liability, worker’s compensation, property and business interruption insurance. Entrepreneur online (12/30)

Study: Small employers are less knowledgeable about health care law

Among U.S. businesses, employers with fewer than 50 employees are the least likely to understand the options available to them under the Affordable Care Act, according to research from the Transamerica Center for Health Studies. The survey found that only about 60% of these employers know about the health exchanges that are available to them. Inc. online (free registration) (5/13)

Covered California unveils a range of choices for small businesses

Small-business owners shopping for health insurance plans on California’s small-business marketplace will have a variety of choices, including preferred provider organizations and health maintenance organizations, state officials announced. Rates in highly populated counties are expected to be lower than those currently offered for similar coverage. Los Angeles Times (tiered subscription model) (8/1)

Small Businesses Hold Off On Hiring Due to the ACA

Forty-one percent of small business owners say they are holding off on hiring because of the Affordable Care Act, according to a Gallup poll. Thirty-eight percent have pulled back on plans to grow their business; 19% have reduced their number of employees; 18% have cut employee hours; and 24% have thought about eliminating healthcare coverage for employees.

Forty-eight percent say the ACA will be bad for their business, compared to 9% who say it will be good, and 39% who expect no impact. Fifty-two percent say the ACA will lower the quality of healthcare; 13% say it will improve care; and 30% say it will have no impact.

Fifty-five percent of small business owners expect to pay more for healthcare as a result of the ACA. Five percent expect their healthcare costs to decline while 37% say the health law will have no effect on what they pay for healthcare. For more information, visit www.gallup.com.

Last Updated 09/22/2021

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