If you work for a small business, there’s a good chance your employer does not offer retirement benefits. A new rule by the Department of Labor could make it easier for your employer to offer retirement benefits.
The rule makes it easier for small employers to team up and offer retirement plans together, like a 401 (k) plan. Small businesses can now join a group that offers a retirement plan without being in the same industry.
A lack of coverage
Around 38 million people have no access to retirement benefits through their companies. Many small businesses have not offered retirement plans due to the cost and difficulty. Around 53% of people working at companies that employ fewer than 100 people have no access to retirement benefits through their employers. Meanwhile, companies with more than 100 employees offer 85% of their workers retirement benefits.
Multiple employer plans
The new rule lets smaller businesses take advantage of multiple employer plans. These plans reduce cost and difficulty for small employers. Instead of the employers setting up and running individual retirement plans, they sign up for one plan that covers multiple businesses.
A group or association in a certain geographical area can sponsor these plans, regardless of industry. Businesses in the same industry can join nationwide groups or associations. A professional employer organization (PEO) – a company that provides human resources for small businesses – can also sponsor the plan.
ERISA covered plans
Since these plans go through an employer, the Employee Retirement Income Security Act (ERISA) covers multiple employer plans. The government has strict rules for plans covered by ERISA that protect retirement benefits.
Having a good retirement plan ensures you have a good retirement. If you work for a small business, this new rule may help your employer give you a good retirement plan.