OPINION:
The spread of 401(k) plans has offered millions of Americans retirement security. Simply put, saving for retirement at work works.
In August 2018, President Donald J. Trump issued Executive Order 13847, Strengthening Retirement Security in America. The president committed to help America’s small business employers and employees more easily save for retirement.
A September 2018 report by the U.S. Bureau of Labor Statistics found that while 85 percent of workers at large private-sector establishments have access to 401(k) or other retirement plans, only 53 percent of America’s small businesses offer that same opportunity. Many of those small businesses, according to a survey by the Pew Charitable Trusts, 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.
This week, as directed by President Trump, the Department of Labor took a major step toward helping those Americans. We 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 (ARPs) 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 ARPs are currently limited to employer groups in the same industry or line of business, this rule will allow associations in a similar geographic area, such as a common state, city, county or metropolitan area, as well as professional employer organizations (PEOs), 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 or spread costs.
Association Retirement Plans can give small and mid-sized businesses many of the 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 percent regularly contribute to individual retirement accounts (IRAs). Association Retirement Plans mean fewer burdens, more clarity and lower costs for America’s job creators.
For far too long, millions of America’s workers of mom-and-pop shops have been left with limited options to secure their retirement future simply because they did not work for a large business or particular industry. The new rule levels the playing field.
This expansion could have a major impact on the future of America’s towns and cities, where small businesses serve as the backbone of the local economy. Small businesses that join an Association Retirement Plan can now better compete with their larger competitors for workers, and employees of small businesses can feel more secure in their jobs today and their future retirement.
This administration is committed to ensuring America’s workforce has more opportunities to save.
• Patrick Pizzella is the acting secretary of the Department of Labor.
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