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Opinion: New law supports employees in retirement

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Workers in Missouri are receiving their statements from the Social Security Administration and other retirement investment accounts during these early months of the year. Additionally, they are assessing whether and when they can afford to retire.

Baby boomers like me are being caught by surprise as they consider retirement. According to the Federal Reserve, 40% of workers ages 55-64 have no retirement savings accounts at all and will rely on Social Security as their only means of income. The average social security check is about $1,900 a month. Of those who do have retirement accounts, the median balance is $100,000 – not enough for most people to maintain their standard of living over decades of retirement.

Data from the U.S. Bureau of Labor Statistics published in 2018 show only 55% of the adult population participate in a workplace retirement plan. BLS says about half of small-business employees do not have access to the same quality work-based retirement plans as workers at large employers. For example, in 2017, only 53% of workers at private-sector establishments with fewer than 100 employees were offered a retirement plan – versus 89% of workers at midsize and large firms.

Small businesses with more than one employee represent about 22% of all small businesses, and with today’s low unemployment, they often find themselves struggling to find and keep qualified workers. Obviously, a small business offering a workplace retirement plan is more desirable to job seekers and helps to retain good employees.

Small-business owners in a recent survey by The Pew Charitable Trusts said prohibitive costs are the primary reason that small businesses do not offer retirement benefits to their employees.

Today, a new law helps with all these issues. The Setting Every Community Up for Retirement Enhancement Act makes it easier for small-business owners to set up retirement plans.

President Donald Trump signed the SECURE Act in the closing days of 2019. This bipartisan measure will benefit every working American saving for retirement because it includes significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets. As well, it will provide small-business owners with vital new tools designed to level the retirement-planning playing field and close the retirement gap for the roughly half of our nation’s workforce engaged in or employed by a small business.

The centerpiece of the SECURE Act – open multiple employer plans – now allows small businesses to pool their resources to offer a retirement plan to workers. This helps to make the plans more cost effective and easier to administer. The new rules of the SECURE Act will help small businesses and their employees in three ways:

  1. It makes it easier for small businesses to set up 401(k)s by increasing the cap under which they can automatically enroll workers in “safe harbor” retirement plans, to 15% of wages from 10%.
  2. It provides a maximum tax credit of $500 per year to employers who create 401(k) or individual retirement accounts under the Savings Incentive Match Plan for Employees programwith automatic enrollment.
  3. In addition to the tax credit for creating a retirement plan for employees’ participation, anyone working at least 1,000 hours in a year (about 20 hours per week), or three consecutive years of at least 500 hours, will be able to participate under the law.

Americans are working longer than ever before. And their life expectancies are longer. While 47.5% of the private workforce is employed by a small business, a chasm exists between the retirement savings options available to these workers when compared with the opportunities that exist for those employed by their larger counterparts in corporate America.

While we are experiencing Trump’s taxpayer friendly, job creating policies, there has never been a better time for small businesses and their employees to be provided greater access to workplace retirement savings plans that will protect their future financial well-being.

Tom Salisbury is the regional administrator of the U.S. Small Business Administration Region VII, which covers Missouri, Kansas, Iowa and Nebraska. He previously worked as the small-business liaison for U.S. Sen. Roy Blunt and in lending for UMB Bank. Salisbury can be reached at thomas.salisbury@sba.gov.

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