The small business retirement plan space is evolving at a glacial pace: Will we run out of time?

As a result of the pandemic, 40 to 50 million people found themselves unemployed. Further, 6 in 10 workers who experienced income or job loss believe the pandemic has negatively impacted their ability to save for retirement and 1 in 4 employees have reduced or stopped contributions in the past year. I have previously explained the impact COVID-19 has made on the industry and how it will impact its future.

The slow pace of evolution in the industry poses a threat to the future of retirement security for individuals. As we inch closer to a post-pandemic world, we realize it’s easier to identify the issues than to actually solve them.

In an age where pensions, personal savings and Social Security continue to run dry, I examined the current state of the retirement plan industry, the future of state mandates and where the industry needs to go in order to provide Americans with a secure and comfortable retirement:

1. State of the industry: In recent years, institutional changes have created many challenges within the retirement plan space. We’ve witnessed large organizations evaluate the market’s profitability and efficacy, and enter with goals of driving assets into their other investments. Oftentimes, these large institutions struggle to innovate and adapt to meet the needs of their customers due to the costly legacy infrastructure and systems in place. By nature, many of these companies have merged and outsourced due to fee compression, competition and consolidation, leading to more detrimental price increases that hinder the next industry revolution.

Outliers like our company and its new breed of competitors will continue to evolve and utilize new models and revenue distribution channels designed specifically to support the small business community.

2. Evolution of state mandates: When is intervention a good thing? When the federal government, states, everyday savers and IRS work together to improve the state of retirement for all. Since the first state-mandated retirement plan was introduced in California in 2008, we’ve seen them gradually evolve.

Early adopters of state-mandated plans focused on SECURE Act 1.0 and utilized Roth IRAs, asset-based fees and a handful of investment options. While states wanted to offer much more, the economics would not let it happen. Now, with SECURE Act 2.0, states are more liberal in their approach to pricing structures. Organizations at the state level are realizing the great yield for businesses, employees and society as a whole.

In the future, it’s likely we will see a consolidation of the state-mandated retirement plans. Smaller states will piggyback on the infrastructure the pioneer states have already established. Although a federal mandate did not make it into The Build Back Better Act, it does not mean SECURE Act 2.0 will not have a chance to see the light. The dominoes will continue to fall and accelerate the process to encourage greater attention and acceptance from the federal government. While not a mandate, SECURE Act 2.0 has great potential to change the dynamics of small business retirement plans with its proposed 100% tax credit to cover startup costs.

3. Industry trajectory: As an industry, we have a long way to go. Looking ahead, organizations will continue to gravitate toward outcomes in their best interest, rather than meeting customers’ needs for a holistic approach to their financial health from budgeting, to insurance, to debt tracking and tax minimization.

It’s essential to remember our client is not the small business utilizing our retirement plans, it’s the saver. We utilize all the infrastructure, machinery, regulation, and compliance so that the end user can have a better outcome. Years from now, I am confident technology will get us beyond the complexities of the industry and allow us to focus more on maximizing the individual’s saving power.

We must acknowledge the world of retirement is glacier paced. As we begin 2022 and see more large corporations enter the industry and more states adopt state-mandated retirement plans, it’s important to remember that, although the industry may slowly change, our dedication to providing the best retirement solutions for our clients must stay the same.

Chad Parks, Founder and CEO of Ubiquity Retirement + Savings, is a former financial advisor and finance veteran with more than 24 years of experience in the industry. He is a nationally recognized, go-to expert on retirement who has had a seat at the table with Washington, D.C. lawmakers to ensure the passage of small-business-friendly retirement legislation. His firm has helped more than 10,000 businesses contribute over $2.8 billion toward retirement savings since 1999.