Why are retirement savings and plans that are so important to so many people, so hard to find?
Retirement savings and plans are highly valued. The MetLife 2018 Benefit Trends Survey found “saving for retirement is a priority for me” (74%), employees want more retirement options from their employer (70%), employees would be willing to take a small pay cut (3.6% on average) in order to get better benefits (84%), and “I am concerned about outliving my savings” (48%). Not many would be surprised by these results, or the results of many other similar surveys.
The lack of access to retirement savings plans is real and widespread. Bloomberg indicates, based on U.S. Government Accountability Office statistics, retiree concerns about outliving their savings are not without merit. Of those 55 and older, 48 percent had nothing put away in a 401(k)-style defined contribution plan or an individual retirement account. 29% of older Americans had neither a defined benefit (DB) pension nor any assets in a 401(k) or IRA account, defined contribution (DC).
Most employee’s retirement savings options are very limited. The Bureau of Labor Statistics’ 2010 National Compensation Survey states only 52% of small and medium-sized businesses, (SMB)s, with fewer than 100 workers offered retirement plans, and only 60% offered health benefits. DB plans, the traditional pension plan, are vanishing before our eyes. According to the Department of Labor, in 1975, 1990, and 2012, 75%, 50%, and 31% of private-sector participants had a DB plan vs a defined contribution plan, respectively.
Employers have every incentive to offer retirement plans, so why don’t they? Employers most often cite administration complexity, cost, and risk as the reasons for not offering retirement benefits. The SMB market, often with little or no Plan assets, is not one most 401(k) plan service providers are interested in. Or providers charge high administrative and asset-based fees often making it impractical for employers. Further, providers are incentivized to choose funds that charge participants higher fees because they will generate more provider revenue even though it will cost the employee more. If the Employer is the Plan Administrator and/or performing certain other Plan duties the Employer is exposed to ERISA Fiduciary Liability and personal risk.
There is high demand for retirement savings, a widespread lack of savings and retirement options, and it’s incredibly difficult for SMB employers to find retirement plans they can afford. What to do?
Join with fellow SMB employers in the Value Point Member Association and leverage the size of the association to reduce complexity, cost, administration, and risk. Providers look at the association as one “employer” / customer. Further, VPA does not make any profit on the benefits themselves, reducing cost and eliminating the potential for conflict of interest when deciding what to offer. Employers with as few as 1 employee, to 100 employees, can now offer a 401(k) Plan for less than $500 a year, including association membership dues, depending on the company’s size. The participant’s Plan asset charge is less than 30 basis points. Plus, there is only one 401(k) Plan and VPA is the Plan Administrator, so each employer does not need individual Plans, nor do they have to administer the Plan, or understand administrative complexities, greatly reducing Fiduciary Liability and administration costs and worries.
How does VPA offer this model? VPA negotiates with nationally and internationally recognized quality providers to get the best mix of services and value for our members, and works with highly qualified professionals. VPA works with those providers and employers in a highly automated and streamlined fashion to keep operating costs as low as possible while offering excellent service to our members and their employees. VPA members also have access to Life Insurance at very competitive rates, and other benefits.
Taken all together, small to medium sized employers now have access to retirement and other benefits at cost, do not have to be the Plan Administrator/Owner or manage the Plan, and can offer affordable benefits to their employees so they have the tools to make retirement a reachable goal.
Contact VPA today or call us anytime at 1-844-877-6468, ext 706. If you already have a retirement plan we can assist with the transition to VPA or assist with you getting a fresh start with VPA!
We look forward to serving you!