Prudential Financial : calls on policymakers to help small businesses provide retirement savings vehicles

Despite an intensifying election cycle, proponents of retirement security reform are not showing any signs of slowing down their efforts to advocate for policy changes to increase access to retirement plans for America's workers.

Nowhere is the need for that access greater than at small businesses, said Bennett Kleinberg, vice president of Innovation at Prudential Retirement's Institutional Investment Solutions business, during a panel discussion at the Small Business Majority Leadership Summit on May 9. Kleinberg's sentiment was echoed by experts from the U.S. Treasury, AARP, the Aspen Institute and the Small Business Majority, who also participated on the panel.

'Today's private sector 401(k) system works well for large and medium-sized firms, but not so well for smaller firms,' Kleinberg said. 'While it's a personal decision for small-business owners to offer a retirement plan to their employees, many are reluctant to offer them, not because they don't want to, but because of the costs, administrative hassle and fiduciary burden associated with these plans.'

Open multiple employer plans, which would allow employers to pool their retirement plans at a lower cost, is a federal solution that has gained bipartisan support in recent years and could allow more small businesses to offer 401(k) plans to their employees, Kleinberg noted.

But it's up to Congress, the Department of Labor and the IRS to modify existing requirements that are making it difficult for employers to feel comfortable forming such plans, such as non-discrimination rules or the 'one-bad apple rule,' which will jeopardize the status of an entire plan if one employer in the plan doesn't comply with tax requirements.

Given that the latest data from the Bureau of Labor Statistics reveals only 50 percent of workers at small businesses have access to retirement plans at work, compared to 89 percent of workers at larger firms, policymakers must mobilize to implement solutions that can close the gap, Kleinberg explained.

Want to speak with Bennett? Contact Monique Reuben.
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