We have today released a special report for policymakers entitled “Smart Strongly Supports Auto IRA/Plan Legislation to Enhance Retirement Security,” describing how requiring employers to maintain a retirement plan can lead to a substantial leap in overall plan participation and retirement coverage for Americans. 

Smart also surveyed over 800 small UK businesses that use the Smart Pension Master Trust platform to offer a retirement plan, and revealed that offering a retirement plan can be done in a way that is very simple for small employers to comply with. The majority of small employers surveyed said the administration of retirement plans is considered “routine” or “easy.” 

Ninety-four percent of businesses with 10 or fewer employees report spending an hour or less administering the plan each month. Interestingly, it is only among businesses with more than 100 employees that a majority report spending more than an hour each month on plan administration. Only 8% of all surveyed employers reported that the plan administration was a “significant additional burden.”

Following legislation in the UK requiring large and small employers to offer a retirement plan, private sector retirement plan participation rose from 42% in 2012 to 86% in 2019. The increase in participation was very consistent across all participant groups, including those that are typically the least engaged, such as the young, part-time workers, low earners and those working for micro-employers. 

While the proposed US legislation is similar in many aspects to the UK legislation, it contains several features that make it even easier and less expensive for employers to comply with, such as:

• The smallest US employers are exempt from the requirement to maintain a retirement plan. Employers with five or fewer employees, employers that have not been in existence for two years, churches, and governments are exempt from the requirement to maintain a plan.
• The US plan does not require employer contributions. 
• The US plans offer tax credits to cover the administrative costs of setting up the plan for the smallest employers. Tax credits cover the entire cost of the plan for five years for the smallest employers (25 or fewer employees). Other small businesses have choices of different generous credits to cover at least 50% of their costs.
• Plans in effect when the rule is adopted will not have to be modified.

“The data is very clear. The administration of retirement plans is not as burdensome as some have believed, but instead is simple and routine for small employers,” said Catherine Reilly, Director of Retirement Solutions at Smart. “This legislation symbolizes a great leap toward the future of retirement security that Americans deserve.”

Jodan Ledford, US CEO of Smart adds, “At Smart, we believe in empowering employers with the solutions they need to support wider access to retirement savings and ultimately retirement security. We have already seen how easy it can be for even the smallest of employers to offer cost-effective and compliant retirement plans, which is why we are proud to support this legislation.”

To view the white paper, click here. For more information on this paper or the work of Smart, please contact Catherine Reilly, Director of Retirement Solutions, at catherine.reilly@smartretire.com.