By Cyril Tuohy
Following in the footsteps of health insurance exchanges being set up by health and benefits brokers around the country, Transamerica Retirement Solutions has launched a retirement exchange to help small businesses.
“We intend for the retirement plan exchange to result in more retirement plan coverage for small business workers,” said Jim Kais, vice president and national practice leader for special markets at Transamerica Retirement Solutions.
The exchange is intended to appeal to small businesses that don’t offer a retirement plan, and to businesses that want to outsource plan administration. Many small businesses shy away from offering retirement plans because they are expensive and too complex to manage.
Joining the exchange will allow employers to spread the cost of managing retirement plans by pooling assets, and by sharing audit and filing fees and document preparation. The exchange also will assume some fiduciary responsibilities and offer members a plan administrator.
Kais called the exchange a “groundbreaking retirement plan solution for small business.”
“The exchange will automatically enroll eligible workers at a 6 percent contribution rate, and the rate will increase by 2 percent automatically in each of the next two years, Kais said in a statement. A Roth provision, which allows for tax-free withdrawals, will be available for all plan participants.
“We believe that employees who are saving at least 10 percent annually for retirement will experience dramatically improved retirement outcomes,” Kais said in a news release.
Surveys show that arranging retirement savings vehicles through their employer is one of the easiest and most efficient ways for Americans to save. While large and midsize employers routinely offer retirement savings programs, small employers have difficulty doing so, and owners and employees have no easy, automatic way to set money aside.
An Ipsos survey of 1,255 small business owners published last year by The American College found that one-third of small business owners are without a pension or retirement savings. In 2008, there were 5.9 million employer firms in the U.S., according to the Census Bureau, the bulk of which – 3.6 million – were firms with between one to four workers.
Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected]
© Entire contents copyright 2013 by InsuranceNewsNet.com, Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.