US looks at making retirement plans easier for small businesses to offer

Up here in Canada, workplace pension plans are becoming scarce, especially for small, private sector employers.

It’s the same story in the USA – however, a report in Benefits Canada suggests that our friends south of the line are getting encouragement from their government to roll out more retirement programs for small business employees.

The article reports that “the Setting Every Community Up for Retirement Enhancement Act, known as the SECURE Act, won final congressional approval” late last year, and has been signed into law by President Donald Trump.

One of the more interesting angles of this legislation, the magazine notes, is that it will make it easier for “small businesses to band together to offer 401(k) and other retirement plans. The option, called multiple-employer plans, lower the costs of administering a plan.”

A 401(k) is a defined contribution-like product that is similar to an RRSP. Unlike an RRSP, the 401(k) can have an employer match. So instead of each small business having to face the cost of setting up and administering its own 401(k), this new legislation would allow them to join together with other small companies to form a multi-employer plan – a plan for multiple businesses. This would greatly lower administration costs, the article notes.

As well, the old $500 credit US businesses got for starting a retirement plan has increased ten-fold to $5,000, the article reports.

It’s hoped, the article concludes, that this new legislation will increase access by companies with less than 50 employees to retirement benefits – right now, only half of them have any kind of retirement program through work.

The 401(k) program got a boost recently from Alan Greenspan, former head of the US Federal Reserve, although it was a bit of a backhanded compliment.

In a recent interview broadcast on BNN Bloomberg, Greenspan suggested that the American equivalent to the Canada Pension Plan, Social Security, be changed from its current defined benefit mode to a 401(k) like defined contribution model.

“The source of the problem is that we have a defined-benefit program for social security…  what we need to do is go to a defined contribution program… that will put a damper on our major problem,” he says in the interview. The concern in the US is that the Social Security program, paid entirely out of tax revenue, is not sustainable for the long term.

Putting the two thoughts together, perhaps having more workplace retirement programs is a good thing if the Social Security program that backstops US retirement isn’t in the best of health. Let’s choose to focus on the good news that a federal government is making it easier for small businesses to offer retirement benefits.

If you don’t have a workplace pension plan, or you do but want to contribute even more towards your retirement, the Saskatchewan Pension Plan is a logical place to start. The SPP offers the winning combination of low fees, a strong track history of growth, and the ability to convert your savings into a lifetime stream of retirement income. It’s a one-stop retirement centre – check them out today.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22