Guest Opinions

Helping small businesses, working owners save for retirement by cutting red tape

Preston Rutledge
Preston Rutledge

Americans are concerned about their ability to save for retirement. We hear this every day from our friends and family, and it continues to rank near the top of Americans’ economic concerns in survey after survey. These concerns are real. Many financial advisers say you will need about 70 percent of preretirement income to live comfortably in retirement. That income includes Social Security benefits, investments and other personal savings. We know that the best way to help Americans meet this goal is to expand opportunities for employment-based savings.

Unfortunately, many small businesses are unable to make retirement savings plans available to their workers due to the cost and complexity of programs. It’s hard enough to run a small business without also taking on the burden of becoming a pension and investment expert. As a result, 38 million private-sector employees nationwide do not have access to a workplace 401(k) or other retirement plan. In Idaho alone, according to a recent report from the American Retirement Association, 27,458 employers do not provide a retirement plan, and 100,000 full-time Idaho employees and 99,410 part-timers do not have access to a workplace retirement plan.

We can, and must, improve these numbers. On Aug. 31, 2018, President Trump signed an executive order making it the “policy of the Federal Government to expand access to workplace retirement plans for American workers.” He directed the Department of Labor to cut through red tape, reduce regulations and make it easier for small businesses to offer retirement plans to their employees.

The department responded to the directive to help small businesses offer retirement savings options to their employees at a better price. Under the final rule published this week, the administration has made it easier for small businesses, including the self-employed, to band together in groups or associations to offer retirement plans as if they were a single large employer. This means that a small business or self-employed individual may take advantage of programs and economies of scale previously reserved for larger businesses.

Large companies have long enjoyed the increased bargaining power and the ability to offer their employees 401(k) options with lower fees that come with a larger participant pool. By contrast, small businesses are often buyers in a seller’s market, lacking the scale to bargain effectively or spread costs. Under the Labor Department’s Association Retirement Plan rule, small businesses can reap many of the same benefits of scale as larger businesses.

Today’s rule empowering association retirement plans will expand access to workplace retirement plans and is a common-sense step that the Trump administration is taking to help more American workers develop a winning plan for achieving retirement income security. 

Preston Rutledge, an Idaho native and a graduate of the University of Idaho, is assistant secretary, Employee Benefits Security Administration, at the U.S. Department of Labor.