Not long ago, people worked for the same company their entire career, and that company typically paid the employee back in retirement through a pension plan. That age has come and gone for most of us, as large employers have switched from offering pension plans to 401(k) plans.
According to a report from the American Benefits Council, 88.7 million Americans participate in a 401(k) plan, but that is less than one third of the population. What about people who work for a small or medium sized business? What options do small businesses have to offer a retirement plan? For a long time, there were not many, but now ForUsAll has a simple solution to help get more Americans on track for retirement.
The State of the 401(k)
To stay competitive in their industries, most large employers offer some sort of 401(k) plan with a company match, but 50% of Americans work for small and medium sized businesses. Of small and medium sized businesses, only 1 in 6 companies offers a 401(k) plan!
These businesses are scared off from offering retirement plans due to fears of high costs, administrative headaches, and compliance concerns, and for good reason. Traditional 401(k) plans were built for companies with huge payroll and legal departments filled with tax and legal experts. Small companies do not have the same luxury.
Traditional 401(k) plan administrators also charge sometimes exorbitant fees to both the sponsoring business and each participating employee. While this made the plan administrators a nice income, it was at the expense of the businesses and employees who relied on them for this incredibly important product, particularly in an age where individuals are responsible for their own retirement savings, and many are missing the mark.
In fact, Americans between 55 and 64 years old, those closest to retirement, only have enough saved on average for a $310 per month income. So what can be done about it, particularly by small businesses with tight budgets?
New, Simple, and Inexpensive 401(k) Options
We have made progress since Lawrence H. Summers, United States Treasury Secretary, said in 1999 that “There are 70 million Americans who do not have a pension, who do not have a 401(k), and the vast, vast majority of whom do not have an IRA. And finding the right vehicles to help them save seems to us to be the highest priority.” Financial technology startup ForUsAll is trying to fix it.
ForUsAll is a modern, low-cost 401(k) plan provider that takes on administrative and compliance tasks so small and mid-sized companies can offer 401(k) plans worry free. Employees can even reach out to the company directly for questions and retirement savings education.
The ForUsAll model focuses on offering features found in large company 401(k) plans, including 3(38) and 3(16) fiduciary, low-fee funds. With a dedicated support team and direct access to live, human, licensed advisors and full payroll integration, smaller companies have a real option to offer a robust 401(k) plan without worries about cost, quality, or compliance.
Take Part in a New Era of Retirement Planning
Employees are a company’s most valuable resource, and replacement costs often reach into the tens of thousands of dollars. Looking out for the best interests of employees protects both the business and the workers.
401(k) plans from ForUsAll auto-enroll employees at a 6% savings rate, and increases by 1% annually until they reach 15%, a recommended savings rate for a comfortable retirement.
Starting at $94 per month for up to 10 employees and only $3-$5 per month for additional employees, there is no reason administrative costs should deter employers from offering an industry leading retirement plan. And there are no setup fees!
Having just $310 per month in retirement doesn’t cut it. Even with social security, workers need to save about 10%-15% of each paycheck to maintain the same standard of living in retirement.
Small and medium sized businesses can now join their larger counterparts in becoming part of the solution. Even if your business is not in a position to offer a sizable match, giving employees the opportunity to save for themselves with a tax advantaged retirement account is key to helping employees reach their retirement goals.
While some 401(k) plans have received bad press for charging high fees to participants, ForUsAll only charges .55%, which includes all mutual fund, advisor, and custodian fees. There are no hidden charges for the employer or the employee.
Now is the time for all businesses to offer a 401(k) plan to employees. With the expensive legal and administrative costs eliminated, there is no reason all Americans can’t be covered by a 401(k) plan. And, the goodwill generated between employers and employees improves employee loyalty and morale.
401(k) plans are a win-win, and it’s time to get everyone on board!