A September 2018 report by the U.S. Bureau of Labor Statistics found that while 85{74309160cd63eca64c36cfd96dc96b337e339df24e8f93d2cabc86a874012891} of workers at large private-sector establishments have access to 401(k) or other retirement plans, only 53{74309160cd63eca64c36cfd96dc96b337e339df24e8f93d2cabc86a874012891} of America’s small businesses offer the same opportunity. Many small businesses cite costs and lack of administrative resources as prohibitive burdens. Overall 38 million private-sector employees do not have access to a retirement plan through their employers.
Last week, as directed by President Trump with Executive Order 13847, the Department of Labor (DOL) took a major step toward helping those Americans. They announced a new rule that will provide greater opportunities for workers to invest in their retirement security while providing certainty for associations and organizations seeking to provide it.
Association retirement Plans (ARP’s) will allow small and mid-size businesses, including working owners, to more easily band together to offer retirement plans as if they were a single large employer. While ARP’s are currently limited to employer groups in the same industry or line of business, this new rule will allow associations in a similar geographic area, such as a common state, county, or metropolitan area, as well as professional employer organizations (PEO’s), to offer important retirement saving options.
Currently, large companies enjoy economies of scale, which gives them increased bargaining power and the ability to offer their employees 401(k) options with lower fees. By contrast, small businesses have lacked the scale to bargain effectively to spread costs. ARP’s can give small and mid-sized businesses many of these same advantages of scale, bargaining power, and market access that large employers enjoy. Among workers who do not have access to a workplace retirement plan, only about 13{74309160cd63eca64c36cfd96dc96b337e339df24e8f93d2cabc86a874012891} regularly contribute to individual retirement accounts (IRA’s).
This expansion could have a major impact on the future of America’s small towns and cities, where small businesses serve as the backbone of the local economy. Small businesses that join an ARP can now better compete with their larger competitors for workers, and employees of small businesses can feel more secure in their jobs and their future retirement. Some LICA Contractors may benefit from these changes. For more information just google Department of Labor Association Retirement Plans.
– (John Peterson, LICA Director of Government Relations)