An overwhelming majority of small-business owners would be likely to adopt or enhance employee retirement plan coverage if they were provided increased tax incentives, according to a recent report from LPL Financial.
The Small Business Retirement Savings Challenge report is based on findings from a survey LPL commissioned of 791 small businesses, defined as those with 25 to 99 employees, in February.
Sixty-eight percent of the owners in LPL’s survey reported offering a plan. Of the remaining 32% that did not, cost (cited by 39%) and complexity (cited by 19%) were the common barriers to offering a plan. Approximately 25% also stated that employees weren’t interested.
Current law provides a non-refundable tax credit of up to $500 per year for up to three years for small businesses that start a plan. LPL’s survey found that many small-business owners feel that the tax benefits are not a strong enough incentive to overcome the hurdles of cost and complexity.
“Although there is no magic number that will ensure every small business owner will implement a plan, our data did show that an increase in the tax credit would likely have a large impact on holdouts,” the report states.
The survey found that 91% of small employers without a plan would be at least somewhat more likely to start a plan if the cap on the current tax credit for starting a plan were increased to $5,000 (as under several bipartisan legislative proposals, the report notes) and adjusted to cover all initial costs.