PLANSPONSOR - August/September 2021 - 9

INDUSTRY ANALYSIS
Nontraditional Small Plans
F
or employer plans, all paths to
retiree financial security are paved
with payroll deferrals, whether into
a traditional 401(k), 403(b) or-for small
employers-a simplified employee pension
plan (SEP), savings incentive match plan for
employees (SIMPLE) or individual retirement
account (IRA), among other options.
U.S. Census Bureau data estimate
that small businesses-those with fewer
than 100 employees-account for roughly
one-third of all U.S. workers. According
to the Department of Labor (DOL)'s
2020 National Compensation Survey:
Employee Benefits in the U.S., small
employers are less apt to sponsor a retirement
plan than are larger ones (55% vs.
85%) and have lower take-up rates (72%
vs. 83%) when they offer one. The poorer
uptake, though, is not for a lack of available
plan options.
The types of plans traditionally used
by small employers are SIMPLE-in either
an IRA or a 401(k) version-SEP and solo
401(k). All three require little preparation
for a small client, says Josh Sailar, who, as
a partner in Blue Zone Wealth Advisors in
Manhattan Beach, California, works with
small-plan employers.
The SEP is available to any size business
and has no filing requirement nor the
startup or operating costs of a standard
retirement plan, Sailar says.
SEPs also avoid SIMPLEs' requirement
that employers provide a match
or make nonelective contributions, says
Chad Parks, founder and CEO of Ubiquity
Retirement + Savings, a 401(k) provider for
small businesses, in San Francisco.
While Parks says he believes SIMPLEs
and SEPs are suitable options for select
companies, he urges employers to consider
a safe harbor 401(k), due to its loan-provision
and hardship-withdrawal features.
With that said, it is worth noting how
many small-plan sponsors use non-401(k)
plans, particularly SEPs. According to the
2021 PLANADVISER Small-Plan Services
Small-Plan Assets, by Plan Type
401(k)
403(b)
457
SEP IRA
SIMPLE IRA
Other
5%
4%
Plans With Assets Under $5mm
401(k)
52,748
403(b)
457
22,777
Nontraditional Plans With Under 100 Employees
SEP IRA
SIMPLE IRA
Solo 401(k) 180,024
State IRA
26,425
Sources: 2021 PLANADVISER Small-Plan Services Survey and 2021 PLANSPONSOR
Recordkeeping Survey
Survey, for plans with under 100 participants,
SEP plan assets, at $238 billion,
far exceed those of other plan types.
SIMPLE IRA plans have $81.5 billion,
and solo 401(k) plans, $36.1 billion. The
much-discussed state IRA plans have
$270 million; there are 26,425 of these vs.
1,111,967 SEP plans.
Sponsors should watch for the
Securing a Strong Retirement Act of
2020, which has passed the House
Ways and Means Committee. Under it,
multiple employer plans (MEPs) would
become an option for small 403(b) plans,
and tax credits for small businesses
would be 100%. -PS
PLANSPONSOR.COM August - September 2021 9
417,678
131,355
9%
17%
31%
29%
1,111,967
http://www.PLANSPONSOR.COM
PLANSPONSOR - August/September 2021

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