Helping small businesses sponsor retirement plans

Tom Foster

By Tom Foster
E. Thomas Foster Jr. is head of strategic relationships for retirement plans for MassMutual.
Posted on Oct 10, 2018

When it comes to access to retirement benefits, workers for small businesses are often at a disadvantage compared to their counterparts at larger companies. It’s a problem that both the government and the retirement plans industry are working to address.

The U.S. Bureau of Labor Statistics reports that 91 percent of Americans employed by companies with 500 workers or more have access to retirement benefits, nearly twice as many as people who work for small companies with fewer than 100 workers1. Slightly more than half of employees of small businesses (53 percent) have access to retirement benefits.

Millions of Americans who work hard every day have limited prospects to save for retirement simply because they work for a small business. Both Congress and the Trump Administration have proposed measures to expand access to and make it easier for small businesses to implement retirement savings plans for their employees.

So why do small employers find it difficult to sponsor retirement savings plans? A 2017 Pew Charitable Trusts survey found that both small- and medium-sized business owners or managers found that the expense of sponsoring a retirement plan, limited administrative resources, and lack of employee interest as the top reasons for not offering retirement plans2. Key changes that may encourage more small employers to offer a retirement plan included greater profitability, financial incentives, and increased demand from employees. Reduced administrative requirements also were high on the list, the Pew survey found.

MassMutual has been listening. The company recently enhanced its retirement plan offering for small businesses, with up to $15 million in retirement assets, to make it easier for themto sponsor retirement plans. MassMutual defines small-business retirement plans as having less than $15 million in assets; the SBA defines small businesses as firms with less than 500 employees.

The enhancements address several of the key issues cited by small businesses as impediments to offering retirement plans.

For instance, a new program, Aviator Pro, is now available for small businesses that seek more comprehensive administrative support. The program offers simplified fee and investment lineups, and fiduciary 3(16) and 3(38) services to guide and protect plan sponsors with administrative and investment duties respectively. Many small businesses lack human resource or benefits departments and need administrative and technical support to provide a benefit program as potentially complicated as a 401(k) or other retirement savings plan.

Meanwhile, MassMutual has introduced a series of enhancements to its original Aviator 401(k) program to enable small businesses to help employees prepare for retirement:

· Reduced pricing, including new break points for fees as assets accumulate within the plan;

· The introduction of new target date fund families in the MassMutual Select T. Rowe Price Retirement Funds, Legg Mason Total Advantage Funds and IndexSelect;

· Additional zero-revenue investments, including more than 500 options from more than 60 investment managers;

· Streamlined installation and administration with several automated services, including enhanced automatic enrollment and automatic escalation services; and

· Introduction of automated employee engagement campaigns that use sophisticated targeting and behavioral science techniques.

More small businesses would like to offer retirement plans to their employees, the Pew survey found, but need a little more help to do so. Financial advisors can help with the right support from a provider that understands the needs of small businesses.

MassMutual is a leader in the small retirement plans marketplace and works closely with advisors who serve the needs of small businesses and their owners. MassMutual applauds the federal government’s efforts to make it easier for small businesses to sponsor retirement savings plans, and we’re also doing everything we can now to make it happen.

E. Thomas Foster Jr. is head of relationship management for retirement plans for MassMutual’s Workplace Solutions unit.



1 U.S. Bureau of Labor Statistics, “National Compensation Survey: Employee Benefits in the United States,” March 2016.

2 Pew Charitable Trusts, “Small Business Views on Retirement Savings Plans,“ January 2017.