...A concern is that small companies and businesses, such as chemical or high-tech start-ups, can be disproportionately disadvantaged in establishing such plans for their employees. Complex government regulations for these plans result in high administrative costs that need to be distributed over a small employee base, effectively increasing the costs for small business owners and employees versus larger companies. As a result, many small businesses choose not to offer 401(k)’s. For those that do, the administrative fees are high, and the investment options often limited, thus negatively impacting employee returns on investment. Considering that a significant fraction of the approximately 163,000 members of ACS are employed by small companies (less than 500 employees), this has a substantial impact on our membership.
Another detrimental component in many 401(k)’s is lengthy vesting periods. According to the 2010 Bureau of Labor Statistics National Survey, 69 percent of 401(k) plans accrue on either ‘cliff’ or ‘graded’ vesting schedules. ‘Cliff’ schedules require employees to remain with an employer for a minimum number of years or they receive no match, and ‘graded’ schedules are plans that slowly increase the employee’s vested portion with years of service. Unlike corporate careers of the past, current careers in the physical sciences are now characterized by multiple shorter-term professional positions. Therefore a professional in the chemical enterprise can be negatively affected by slow vesting 401(k)’s resulting in lack of portability.
Specifically, in the area of retirement plans and 401(k)’s, Congress needs to take action toI gotta say, as a statement of desired policy, I agree with most of it. I have worked for an employer who claimed that 401(k) complexity and cost was too high (and of course, they would have never have gone for a match.) But the pre-tax nature of 401(k)s is pretty great, in my opinion.
- Reduce the regulatory complexity of 401(k) plans available to small business owners in order to make them more economically efficient and effective.
- Enact policies that promote the development of faster vesting and more portable 401(k) programs....
(I wonder if Vanguard has a small-company 401(k) option? I am going to guess the answer is 'no.')
Glad to see that CEPA (among other ACS committee) has put together a statement -- good stuff.