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Survey: Misconceptions about Retirement Plans Often Make Them Scarce in Small Companies

Employee Benefits
  • New survey finds that more than half of small employers don't offer an employee retirement plan.
  • Majority of businesses that do offer a retirement plan believe "It's the right thing to do."
  • Benefits of a company retirement savings plan extend to both employees and employers.

Many small employers don't offer their workforces the valuable benefit of a retirement savings plan, according to a recent Paychex Small Business survey that polled 250 principals of U.S. companies with two to 500 employees. Too often, small-business owners believe they can't afford it, and may not realize the potential advantages a retirement plan can bring. Yet this benefit can serve as a powerful hiring incentive, improve employee retention, and offer employer tax advantages.

A portion of the survey asked respondents:

  • Whether they offered a retirement savings plan, and if so, what kind;
  • Why they offered a retirement plan; and
  • Why they didn't offer a retirement plan.

The results were revealing.

Half of all small businesses don't offer a retirement savings plan

The survey found that more than half — 53 percent — of companies surveyed do not have a retirement savings plan for either employees or owners. Of those that do feature this benefit, the types of plans varied:

  • Traditional 401(k) savings plan with employer match – 15 percent
  • Owner-only 401(k) plan – 13 percent
  • Traditional 401(k) savings plan without employer match – 12 percent
  • SIMPLE individual retirement account (IRA) – 11 percent
  • Profit-sharing plan – 9 percent
  • 403(b) plan – 6 percent
  • Safe harbor 401(k) plan – 2 percent
  • Other – 1 percent

"It's the right thing to do"

The 47 percent of responding businesses that offer a retirement plan benefit do so for many reasons, the leading motivation being that doing so is the right move. The survey found that companies include a retirement plan because:

  • It's the right thing to do – 44 percent
  • For my personal retirement – 40 percent
  • To retain talent – 30 percent
  • To attract better quality talent – 26 percent
  • For the business tax savings – 25 percent

The leading reason indicates a sense of altruism, and possibly an awareness of the dire state of retirement savings in the United States. Consider the fact that 69 percent of Americans have less than $1,000 in savings, according to a 2016 survey of 7,000 individuals by GOBankingRates.

Misconceptions about retirement plans

Why don't small companies offer retirement plans to their workers? In a word: misconceptions. The Paychex survey found three reasons for employers not sponsoring retirement plans:

  • "I don't think I can afford it" – 59 percent
  • "I don't see the need or benefit" – 44 percent
  • "It seems too complicated to set up and administer" – 7 percent

In reality, 401(k) plans can now fit into the scope and budgets of small firms. The benefits of offering a retirement plan are numerous to both workers and company owners. And plan administration doesn't have to be a hassle, especially if you include 401(k) management in your payroll operations.

A little knowledge about retirement plans can deliver big rewards

Don't let lack of understanding prevent your company from establishing an employee retirement savings plan. This valued benefit is a powerful tool for worker recruitment and retention, and a source of tax savings for the business. Yet misconceptions persist about the costs of establishing a plan, and many business owners aren't aware of the potential advantages available.

Paychex can help you find the right employee retirement plan for your company and your budget.


The Paychex Small Business Survey was administered by Bredin, a third-party research firm specializing in small businesses, and conducted August 18-24, 2017. Bredin polled 250 principals of U.S. companies with two to 500 employees. Those surveyed were not exclusively Paychex clients; the group also included other small-business owners to provide a full view of the small-business landscape.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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