[National Review] Roughly a third of privately employed American workers ‐ and half of those at businesses with fewer than 100 employees ‐ don’t have access to an employer-sponsored retirement plan. This means that they have to figure out other options for themselves, and that they can lose out on some of the tax breaks everyone else gets. Unsurprisingly, they also save far less for retirement.
This isn’t merely the free market at work ‐ and not just because special tax incentives are involved. (That’s a completely different article.) Current regulations make it difficult to provide "multiple-employer" plans, under which small employers work together to cut costs and offer retirement benefits as a group. Since small businesses that don’t offer plans often say cost is the reason, loosening these regulations could greatly improve the situation. And a proposed rule from the Trump administration’s Labor Department would do just that.
This is a commonsensical proposal, following suggestions endorsed by business and retirement groups alike, to put big and small businesses on similar footing when it comes to offering retirement benefits. Even in 2018 it is the kind of thing that should receive bipartisan support. The one risk is that it could be challenged in court for pushing the boundaries of the current statutes, which Congress can and should fix.
"Small and medium-sized businesses could come together under an association to offer a 401(k)," a senior Labor Department official told me in a call previewing the rule on Friday. "So instead of the corner grocery store, the dry cleaner, and a restaurant each having a separate plan, they could all come together under one New York Chamber of Commerce 401(k)."
In addition to making it possible for more businesses to offer plans to begin with, this would improve the plans on offer. In general, thanks to economies of scale and negotiating power, bigger 401(k)s tend to pay lower fees. They also diffuse the various hassles associated with maintaining a plan. "If you ask a small-business owner, ’Do you want to hire a lawyer and make all these regulatory filings?’ they’ll typically say no," the Labor Department official said. "But if they can just join an organization they know is reputable and remit whatever money their employees would like to save, they’re much more likely to offer a plan." |