Nationwide Financial Services Survey:Small businesses looking for help from investment professionals to manage economic downturn challenges
Economy putting pressure on small biz ability to offer 401(k) for employees
FOR IMMEDIATE RELEASE
June 8, 2009
Chad Green (614) 677-1679
Jeff Whetzel (614) 249-6354
Columbus, Ohio— According to a Nationwide Financial Services survey released today, most small businesses don’t think the economy will impact their ability to offer a 401(k) retirement plan. However, 44 percent anticipate that they may have to reduce or stop matching employee contributions, a number that increases to more than half of those respondents who identified themselves as small business owners. The survey results show that small businesses understand the value of offering a retirement plan to their employees and point to several key areas where investment professionals and plan providers can help.
“For most Americans, their 401(k) is their primary, if not only, source for retirement savings and the reality is that most workers save virtually nothing outside of these plans,” said Paul Ballew, senior vice president of insights and analytics for Nationwide. “It’s important for small businesses to try and maintain this critical benefit for their employees.”
According to the survey, three in four small businesses don’t expect the economy to impact their ability to continue offering a 401(k) plan. However, 51 percent of small business owners anticipate that tough economic times could force them to reduce or stop matching employee contributions to the plan.
“Investment professionals can play an essential role in helping small businesses continue to offer a competitive retirement plan to their employees even in the wake of the economic downturn,” said Bill Jackson, president of Nationwide Retirement Plans. “The survey shows that small businesses want to work with investment professionals who understand their company’s needs and can develop customized solutions to address them.”
401(k) retirement plans aren’t the only employee benefit impacted by the economic turmoil. Approximately 34 percent of small businesses expect to modify or reduce their health care benefits this year. Those most concerned about having to change their health care benefits include company owners at 53 percent and those businesses with 50 associates or less at 39 percent.
“Though small businesses are facing some tough choices right now, our survey shows that they clearly understand the importance of offering a 401(k) as part of their benefits package,” said Ballew. “We found that 64 percent of those who offer a 401(k) do it to help their employees invest for retirement and 21 percent offer a plan to attract and retain good talent.”
Biggest 401(k) retirement plan concerns
To help small businesses deal with the economic turmoil, plan providers and investment professionals need to understand the unique challenges they’re facing. The survey asked companies to rank their top five concerns regarding their retirement plan and found that 31 percent listed providing investment education to employees as their biggest concern. This concern increased among plans with a higher asset size.
Ranking of top 401(k) retirement plan concerns
- Providing employees investment education – 31 percent
- Fiduciary and legal responsibilities related to the plan – 29 percent
- Selection and monitoring of retirement plan investment options – 21 percent
- Investment and administrative fees – 12 percent
- Adding more automated features to help make investing easier for your associates – 6 percent
Help is available
The survey found that 75 percent of small businesses that have an investment professional place strong importance on their ability to understand the company’s unique needs. In addition, 74 percent said that they value an investment professional’s ability to help them meet their legal responsibilities associated with offering a retirement plan. Companies with between five and 50 employees were more likely than those with more than 50 to indicate they need help meeting legal obligations.
“We’re always looking for new insights into small businesses,” Jackson added. “This knowledge helps us better serve this distinct population and ensure we’re presenting them with resources and solutions designed to meet the specific needs of their company and its employees.”
An independent market research firm conducted phone interviews between December 2008 and March 2009. A total of 401 respondents completed the survey. To qualify for participation in the survey, respondents had to meet the following criteria:
- Be employed full-time, part-time, or self employed
- Have 5 - 250 employees across all locations
- Have at least a moderate influence in decision making regarding the company’s retirement plan
- Offer a type of 401(k) retirement plan (Traditional, Safe Harbor, SIMPLE, or Profit Sharing)
- Have offered a 401(k) retirement plan for at least one year
- Have between $500,000 and $10 million in retirement plan assets
Nationwide, based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by A.M. Best. The company provides a full range of personalized insurance and financial services, including auto insurance, motorcycle, boat, homeowners, and life insurance, farm, commercial insurance, administrative services, annuities, mortgages, mutual funds, pensions, long-term savings plans and health and productivity services. For more information, visit www.nationwide.com.
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