Workplace retirement plans are the key to successful retirement for American workers in small businesses, according to a survey by the Guardian Insurance & Annuity Company.
The Small Plan 401(k) Retire Well Study: What's Working and Not Working for Small Businesses showed wide-spread satisfaction among sponsors who offer qualified retirement plans in the small-plan market, particularly if they work with a financial professional.
Ninety-eight percent of plan sponsors are either "very" or "somewhat" satisfied with their 401(k) plan. In addition, 61 percent of plan sponsors who work with a financial professional are "very satisfied" with their 401(k) plan overall compared to only 40 percent of sponsors who are "very satisfied" with their plans and do not use a financial professional.
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This finding underscores an industry trend that has been anecdotally apparent for some time, namely that there is a wide gap in plan satisfaction between those sponsors who work with financial professionals and those who do not, according to Guardian.
The study revealed that nine out of ten plan sponsors consider their 401(k) successful when it comes to helping them recruit and retain good employees, keeping them competitive when it comes to benefits and securing an adequate retirement income for their employees.
It also showed that employers think their plans work for their employees as well. Approximately nine in ten say their 401(k) is successful in terms of making retirement savings easier, providing planning tools, encouraging systematic savings and helping employees fund a secure retirement.
"Nothing in our history has helped promote retirement savings more than workplace defined contribution plans and this study tells us that the vast majority of small business owners who offer 401(k) plans are satisfied with both the plan itself and their plan providers," said Douglas Dubitsky, vice president at Guardian Retirement Solutions. "Even for small businesses, 401(k) plans are delivering what they were designed to do."
Forty-six percent of businesses surveyed did not offer a retirement plan, with many citing the potential expense as the reason. But 58 percent indicated that they were interested in setting up a plan within the next three years.
This, coupled with the fact that nearly 30 percent of business owners did not know which type of plan was best suited for their company, highlights the huge opportunities for financial professionals in the small-plan market, said Guardian.
According to the study, virtually every aspect of 401(k) sponsorship is more successful if a financial professional is involved.
"While most plan sponsors are satisfied, there are still areas where employers and employees need help. Small-plan sponsors are increasingly realizing the value of working with third-party support services and financial professionals for outsourced solutions that help save time and mitigate fiduciary risks," said Dubitsky.
"This, and the fact that many non-sponsors are extremely confused by their options in the 401(k) market, reinforces what we have seen at Guardian for a long time – there are more and better opportunities for financial professionals in the small-plan retirement market than ever before."
The online survey of 451 senior executives from for-profit organizations with 25-249 employees that have been in business three years or more and who are involved in the selection and evaluation of providers of employee benefits was conducted Nov.12-Dec.14.
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