SurePayroll Insights Survey: Why Most Small Business Owners Don't Offer 401(k) Benefits

SurePayrolls survey suggests most small business owners have limited knowledge of the benefits and affordability of 401(k) plans

CHICAGO — May 15, 2007 — A recent survey by online payroll service SurePayroll finds that 71% of small business owners do not offer 401(k) retirement benefits to their employees, based on the belief that 401(k) benefits are incompatible with small business.

The survey suggests many small business owners view 401(k) plans as too costly and impractical to implement, and are not aware of the importance of 401(k) or 401(k) solutions tailored to the needs of small businesses.

SurePayroll’s survey results contradict the findings of a small business survey conducted by research firm TowerGroup in 2002. At that time, the firm estimated that the emergence of online 401(k) plans would increase the amount of small business owners who offer 401(k) plans to 65% by 2005. According to SurePayroll’s survey results, though, the number has not increased as expected.

“The amount of small business owners who offer 401(k) benefits to their employees has not reached the level predicted five years ago, and a major reason why could be because most are not aware of the newer online 401(k) plans they can afford,” said SurePayroll President Michael Alter.

Small business owners fear high costs

Many small business owners surveyed cited fear of not being able to afford offering 401(k) benefits as a major concern keeping them from implementing a plan.

“We have explored upgrading our plan to a 401(k), but it seems like the companies who want to administer them are looking for fat cats that have a lot of income to sock away. We are a younger company and we need to help our employees get started without excessive administration costs,” responded one small business owner.

Traditionally, 401(k) benefits have been associated with large companies that have the means to offer more extensive plans, but recently developed services, such as online 401(k) plans, have become an affordable option for small businesses.

SurePayroll to offer payroll-integrated 401(k) solution

SurePayroll will soon launch a 401(k) plan, Sure401k, that is available independently or as part of its standard payroll processing service for small businesses.

SurePayroll has tailored Sure401k to be specifically functional for small businesses, placing an emphasis on simplicity and affordability for small businesses of all sizes.

The product will allow small business owners to offer 401(k) benefits to themselves and to employees at low cost and little effort, whether the owner employs others or is the sole employee.

Other Sure401(k) features include:

• A wide selection of nearly 300 premiere funds — including 15 ETFs — from companies such as Fidelity, T. Rowe Price, Vanguard and more
• Seamless integration of a customer’s 401(k) and payroll processing
• Tax-deductible employer contributions, should the customer choose to offer a matching program
• A Solo(k) plan for businesses whose only employees are the owners
• Full-service recordkeeping, administration and compliance testing
• The ability to tie company goals to 401(k) incentives; for example, offering a higher match percentage for employees if the company meets its goals

Are small business 401(k) fears unfounded?

While many small business owners believe 401(k) plans are too expensive to offer, a 2006 survey conducted by research firm Harris Interactive suggests their fears could be based on preconceived notions of 401(k) instead of concrete evidence.

According to the survey, while most respondents felt 401(k) was too costly to offer, 63% admitted they had no factual knowledge of how much a 401(k) plan would cost to administer.

In addition to fear of high costs, 23% of SurePayroll’s survey respondents noted employee apathy and lack of demand as a reason for not offering a 401(k) plan. The responses suggest most small business owners feel that even if they offered a 401(k) plan, employees would not be interested.

However, many survey respondents indicated their business has noticeably improved since offering a 401(k) plan to their employees. 52% of respondents who already offer 401(k) reported that doing so has had a noticeably positive impact on their business. 29% said they have been able to attract and retain employees by offering 401(k) benefits.

“Most employees don’t feel it is their place to ask for retirement plans from their employers, and employers shouldn’t mistake silence for indifference,” Alter noted. “Retirement plans benefit employees, and can ultimately benefit a business by retaining and attracting superior talent.”

Additional insight

Surveyed business owners offered additional tips and comments to fellow entrepreneurs regarding 401(k) plans for small businesses. Advice offered by business owners included the following:

• “I think the owner should always offer to at least apply 2% to a 401(k) type program to all employees. It helps to educate all employees on savings, as they can see what 2% can do, and then they are more inclined to invest themselves. I believe this helps employees to feel that the employer is on their side, even if he can not offer them a pension plan.”
• “A small employer should plan for retirement because no one else is going to plan it for you. Also, you should reward employees along the way by including them in a retirement plan. Remember, they contribute towards your success and how much you can invest in your retirement.”

About SurePayroll:

SurePayroll is the online alternative to ADP® and Paychex®. SurePayroll's service and team members are dedicated to providing an easy, convenient online payroll service at a price small business owners can afford. Tens of thousands of customers rely on SurePayroll to process payroll wherever they want in as few as two minutes.

In addition, SurePayroll offers small businesses solutions for managing 401(k) plans, health insurance, workers' compensation, HR compliance and employee screening. For accountants and banking partners, SurePayroll provides private-label services that enable them to offer payroll processing to their small business clients.

Over the last decade, SurePayroll has received numerous prestigious awards for its innovative technology and outstanding customer service, including recognition from PC Magazine, Inc. 500, Accounting Today, the Stevie Awards and many others.

For more information, you can visit http://www.surepayroll.com, call 877.954.7873 or follow us on http://twitter.com/SurePayroll.

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