What You Need to Know
- General interest in the idea of multiple employer plans looks strong.
- Even some small employers still sponsor defined benefit pension plans.
- Small employers and other employers have different ideas about the importance of offering retirement benefits.
For now, small U.S. employers may be much more likely to set up a traditional retirement plan than to try to offer one of the new “pooled employer plans”, or PEPs.
The Transamerica Institute and the Transamerica Center for Retirement Studies have included data supporting that assessment in a new summary of a survey, of about 1,900 employers, that was conducted in late 2020.
The researchers who conducted the survey classified any employer with fewer than 100 employees as a small employer.
About 6% of the small employers surveyed said they were very likely to begin sponsoring a 401(k) plan or similar plan within the next two years. Only 1% said they were very likely to considering joining a multiple employer plan or a PEP.
The survey managers found evidence that employers could eventually warm up to pooled employer plans: about 31% of the small employers said they were “somewhat likely” to set up traditional retirement plans in the near future, and 29% said they were somewhat likely to join a multiple employer plan or PEP.
The answers imply that small employers are almost as likely to have some interest in the new PEPs as in traditional plans.
Pooled Employer Plans
The Setting Every Community Up for Retirement Enhancement Act of 2019, or Secure Act, encourages small employers to offer retirement plans, by creating a framework for PEPs. Pooled employer plans are multiple employer retirement plans that are registered with the U.S. Department of Labor and comply with Secure Act rules.
Both investment advisors and broker-dealers can serve as PEP providers. Many financial services companies, including Transamerica, have been developing PEP programs.
Retirement Benefits Data
The small employers that participated in the survey were less likely to offer retirement benefits than larger employers surveyed, but many have been offering retirement benefits, and a sizable percentage still have defined benefit pension plans.