Over the last few years, eight states have passed legislation making it mandatory for businesses of all sizes to offer access to retirement savings plans.
By 2022 states will offer government-run retirement plans as part of their requirement for every company to offer some form of retirement savings to their employees.
But it is unclear whether those plans will really fit the needs of most small businesses.
That’s according to Ubiquity Retirement + Savings [www.myubiquity.com] — a leading fintech company providing affordable retirement solutions for small businesses. Efforts to close the retirement gap are critical but small businesses should be aware that there are likely to be better options for them than their state’s public retirement option.
Here are a few things small businesses and their employees need to know as these mandates go into effect.
>> THE PUBLIC OPTION IS LIKELY NOT THE BEST OPTION
As the recently terminated, myRA program has shown, government-run benefit programs are often a one-size-fits-none alternative that are rarely the best options for companies or contributors. Low cost plans are available from private 401(k) companies that will work with you to find the plan that best works for you.
>> OPT OUT IS THE NEW OPT IN
Automatic enrollment has proven to boost retirement savings so states are including them in their mandated plans. Small businesses that choose to use private 401(k) companies may be required to offer a comparable auto-enrollment mechanism.
>> THE LOCATION OF YOUR EMPLOYEES MATTERS
Generally, the mandates apply to where an employee works, regardless of where the company they work for is located. Businesses should be aware of these mandates if they have satellite offices in any of the states implementing the mandates.
>> MANDATE DEADLINES ARE APPROACHING SOONER THAN YOU THINK
While these mandates are being phased in gradually, they will be fully in effect in most of these states by 2022. Small businesses of all sizes should be researching their options now need to be prepared by then lest they open themselves up to penalties.
With nearly 20 years working to close the retirement savings gap, Ubiquity Retirement + Savings is uniquely positioned to speak on the impacts these state mandates will have on businesses and savers.