Forget the small size of your business. Offering benefits creates a powerful incentive. For example, a retirement plan helps create a strong team. It produces happy workers. And they stick together for years.
Are You Too Small to Offer Employee Benefits?
You may think you’re just too small to offer benefits. But Small Business Trends met with Kevin Boyles of Millennium Trust Company. And we discussed exactly that. The conversation focused on retirement plans.
We also cover a few state mandates on companies’ obligations for employee retirement plans. And look at the roots of misconceptions around the issue of SMBs’ ability to sponsor a retirement plan. We check out an an online portal for employers. And examine a self-service account dashboard for employees. And we discuss an enhancement through Morningstar (NASDAQ: MORN) that’s unique to Millennium Trust.
More About Kevin Boyle
Boyles serves as the head of Workplace Savings Solutions for Millennium Trust. He holds the Certified IRA Services Professional (CISP) designation from the Institute of Certified Bankers. And he also possesses the Certified IRA Professional (CIP) designation from the National Association of Federal Credit Unions. He spent 18 years with Ascensus. The company previously existed as BISYS Retirement and Universal Pensions, Inc.
Boyles speaks in over 30 states and Canada. He contributes content and quotes to a variety of publications. They include U.S. News & World Report, American Banker Magazine, Plan Advisor Magazine, Financial Advisor Magazine, The Federal Credit Union Magazine, the New York Times, the Washington Post and more.
Boyles operates from Oak Brook, Illinois. Millennium Trust serves all 50 states.
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55 Million U.S. Workers Do Without
Small Business Trends: Millions of small businesses still don’t offer a retirement savings option for their employees. Why?
Kevin Boyles: The short answer is, there are a number of factors involved. For definitive data, we conducted our comprehensive Small Business Retirement Survey as a deep dive into these employers and how they view retirement.
Our research verified much of what we knew anecdotally – that cost was one of the major factors, for instance. But the surveys also revealed that many employers didn’t think their employees even cared if they had something available or not. That specific finding surprised us, because employees emphatically want to save for retirement through work! We know this through our survey data.
The other thing that surprised us was that over half of small employers have looked at offering something, but still chose not to.
Why Some Employers Decided Against
Small Business Trends: With the owners who “researched but ultimately did nothing”, were they afraid? Overwhelmed? Some other reason?
Kevin Boyles: Well, first off are the three main factors the employers in our survey felt were barriers. Those were cost, complexity, and the belief that their businesses weren’t large enough to offer something. That’s the easy answer. Of the ones who researched plan options, the vast majority only researched a 401k plan as an option. And unfortunately, 401k was the type shown most often.
So we contend that when an owner does a search, what he or she is shown is an additional major factor. And if all they’re being shown are 401k’s, well, what do you think they’ll assume? Going only by what they see, they would assume it’s the only choice out there. The truth is, while 401k plans are awesome for hundreds of thousands of businesses, they are simply not the right fit for many small businesses, primarily because of cost, complexity, and the “we’re just not big enough” mentality. And because they aren’t shown the whole other universe of options out there, they end up doing nothing, even though employees would appreciate something.
401k Alternatives for Small Companies
Small Business Trends: Let’s get into that whole other universe.
Kevin Boyles: There is a whole universe of options that most small business owners never come across, and that is why we created our Retirement Savings Selector Tool for Small Business. Its purpose is to ask an employer a few quick questions to get a meaningful comparison of the options available — including 401k. We feel it’s imperative for employers to get access to an agnostic resource to help them vet all available options.
Every State is Different, So Learn and Comply
Small Business Trends: In recent years, a number of states introduced retirement savings programs for small businesses. How do you see those fitting into the overall mix?
Kevin Boyles: In a word, favorably. These programs are an excellent link in the chain of giving more American workers access to save for retirement through their workplace, which is critical to combat the savings crisis that is happening in our country right now.
AARP has published research that shows that people are 15 times more likely to save for retirement if they can do so through work. There are a few drawbacks with state-sponsored plans, though. The first is reach.
Only Three States Have Mandates
As of right now, only Oregon, Illinois, and California have a state mandate for employers to offer a savings option for their employees. There are a couple of other states that may eventually do the same, but these kinds of mandates are far from being nationwide. You also have states like Washington, which offers retirement marketplaces where different providers can serve their solutions for small businesses in that state.
The next drawback is that the mandated programs have different rules from state to state. In Oregon, all employers must either offer a retirement plan for their employees, or else they’re mandated to participate in the Oregon state program. In Illinois, you don’t have to participate or be subject to the mandate if you have fewer than 25 employees. That’s just one example of differences between three states with these programs that are up and running today.
The final drawback is that the investment options offered in these state programs are somewhat limited compared to what you would find in conventional, private sector offerings. So yes there are drawbacks, but these state programs are extremely well-intended and are moving the needle in the states that they exist in. We see them as existing very harmoniously next to more robust solutions like what we are bringing to the marketplace.
Priced Right for Small Companies with a Dose of Morningstar, Inc.
Small Business Trends: As for what you’re bringing to the table, is it wholly unique?
Kevin Boyles: The answer is yes, with a touch of no. The yes part is that what Millennium Trust has done is take the universe of what we call “sub-401k” or “IRA-based” solutions that already exist in various pockets out there and has woven them together into a cohesive, turnkey solution that’s never been done in exactly the way we are doing it.
Another unique element about our Workplace Savings Solutions is that we have hired Morningstar to display a world-class, multi-manager lineup of mutual funds and a series of target date funds for employees to choose from. It’s comparable to what you would see in most good-sized 401k plans, so the employer is offering the same quality of investments in these types of programs. The invest lineup is available in all of our Workplace Savings Solutions, including SEP plans, SIMPLE IRA plans, or payroll-deducted IRA programs for employees.
And finally, we structured our program pricing so that the employer simply pays a one-time, $250 implementation fee to establish the program and typically has no ongoing cost to their business.
SEP, SIMPLE, and payroll-deducted IRAs aren’t new by any means. So through that lens, it’s less unique. Because all these things have been out there for years. But we believe we are trailblazing as we’re taking all of those disparate pieces. And bundling them into an easy-to-understand solution that’s not only very simple to use but very affordable, too. We understand the why. We understand the barriers to entry. Both real and perceived. And we are poised to help small business owners and employees, at scale. From coast to coast.
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