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Report Reveals Differences in How Small Business Employers and Employees View the Need for 401(k)

64 Percent of America‚Äôs Workers Feel Small Businesses Are “Obligated” to Provide 401(k),
While Only 13 Percent of Small Business Employers Actually Do

BELLEVUE, Wash. (PRNewswire) -- While many small business owners still regard the 401(k) as an unnecessary perk, 64 percent of their employees view it as an important benefit that employers should be obligated to offer, according to a new survey.

The second annual Small Business Annual Retirement Trends survey (SBART), commissioned by ShareBuilder Advisors, LLC, and conducted by Harris Interactive revealed a number of major gaps, as well as similarities, in how small business employers and employees view 401(k) benefits.

"This report provides a wake-up call for small businesses that, in the past, may have been quick to discount the importance of a retirement program for their employees as well as themselves," said Stuart Robertson, general manager of ShareBuilder's small business group. "The data is pretty compelling as it reveals 80 percent of employees regard the 401(k) as a 'socially-responsible' thing to do for companies to provide their employees."

Different Perspectives on Retirement Benefits

The report calls-out a number of areas where employees and employers had differing outlooks and approaches on retirement-related topics including:

  • Preparedness for Retirement: Despite a large degree of uncertainty on both sides, employers are more confident overall in their retirement savings than employees (53 percent versus 41 percent are very/somewhat confident).
  • Funding Retirement: Employees are most likely to use 401(k) accounts to fund their retirement at least in part whereas, employers are most likely to rely on personal investments in IRAs, stocks and mutual funds.
  • Role of Retirement Benefits in Attracting and Retaining Employees: Less than 40 percent of employers view retirement plans as crucial in attracting and retaining employees versus nearly 60 percent of employees.
  • Employee Retention: Less than 20 percent of employers believe a 401(k) plan would prevent their employees from leaving compared to nearly 40 percent of employees who would leave their current job for one that provided a 401(k).
  • Obligation to Provide Retirement Plan Benefits: While half of employers feel a strong/some sense of responsibility to offer a retirement plan, employees are even more likely to feel that an obligation exists (64 percent).

Where Employers and Employees Agreed

This year's SBART also revealed several similarities between employers and employees when it came to retirement issues including:

  • Lack of Overall Satisfaction with Their Retirement Benefits: Only one out of four employers and employees reported being extremely/very satisfied with the retirement benefits offered by their company.
  • Most-Important Attribute of 401(k) Program: Both groups cited "Ease" — with employers referencing "ease of administration" and employees "ease of use".
  • Most-Important Feature: Both groups showed most interest in the Roth 401(k) over other features such as Lifecycle funds, ETFs, and auto-enrollment.

Other Findings of Note

  • Owner-only firms are least-likely to have a 401(k) program (8 percent).
  • The number-one reason that employers gave for not planning to ever offer a 401(k) was "not enough employees to make it worthwhile" followed by "can't afford to offer company match" and "employees not interested".
  • The leading reason that employers gave for re-considering a 401(k) was the incentives provided via tax breaks (26 percent of employers).
  • 52 percent of employers without a 401(k) don't know what to expect to pay in annual administration fees for a 401k program.
  • Female owners are much less likely to offer retirement benefits at their business vs. their male peers (73 percent of women owners do not offer v. 61 percent for male owners)
  • Women owners in general are less confident in retirement preparedness than male owners (39 percent vs. 58 percent) and are less likely to have personal investments like an IRA (44 percent vs. 55 percent), stocks (32 percent v. 53 percent) and mutual funds (32 percent v. 49 percent).
  • Half of all employers at micro businesses (1-25 employees) feel no responsibility to offer retirement plans while three-quarters of employers of small businesses (26-50 employees) feel they have either a strong or, at least, some level of responsibility.
  • Female employees feel more strongly than male employees that employers are obligated to provide retirement benefits (70 percent v. 60 percent)


The SBART is an annual survey commissioned by ShareBuilder 401(k) to measure small business employer and employee attitudes, preferences, perspectives and needs for retirement benefits. This survey was conducted online within the United States by Harris Interactive from July 26 through August 28, 2007 among 519 small business employers (including owners, partners CEOs, chairmen and presidents with 1-50 employees) and 1147 full-time small business employees aged 18 and over. No estimates of theoretical sampling error can be calculated; a full methodology is available.

ShareBuilder 401(k) provides easy, affordable and smart 401(k) retirement plans for small businesses, ranging from the self-employed to those with 25 or even more employees. ShareBuilder 401(k) is a leader in providing 100% index-based ETF investments (plus a money market) in 401(k) plans. As part of ShareBuilder Corporation, which operates, a leading online brokerage, ShareBuilder 401(k) offers a suite of on-demand services that make it simple for employers and employees to open and manage their retirement plans online at ShareBuilder 401(k)'s market-efficient investments and model portfolios make it easy for employees to select smart investments to help them get on track to meet their retirement goals. Customers can also take advantage of ShareBuilder 401(k) Consultants, Customer Success Managers, and Customer Care Agents to receive assistance in choosing and managing their retirement benefits.

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Cathy MacFarlane

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