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Affordable Care Act Has Small Businesses Focusing On Retirement Benefits

April 09, 2015

Businesses with 50 to 299 employees are enhancing retirement contributions, Nationwide Retirement Institute survey finds

Columbus, Ohio - A survey of small business owners uncovered a surprising consequence of the Affordable Care Act (ACA) on their operations: Their ability to offer competitive medical benefits has diminished as employees realize their health care benefits are less attractive than those provided under government plans. To compensate, The Nationwide Retirement Institute survey found that many of these businesses with 50 to 299 employees are already increasing their contribution to employee retirement plans.

The ACA requires businesses with at least 100 full-time employees to offer health insurance, and in 2016, companies with 50 or more employees must do the same. But, the online survey of 334 U.S. small business owners conducted on the Institute’s behalf by Harris Poll revealed that:

“A company’s health benefits package once proved to be a deciding factor in where employees chose to work. With health care now available on the open market, it’s harder for employers to separate from the pack,” explains John Carter, president of Nationwide’s retirement plans’ business. “Today’s job prospects will look for employers that provide them the greatest amount of total compensation. That includes those who match a higher percentage of what they will invest into a company retirement plan.”

Already, many small businesses are doing just that, the survey shows:

Major changes

As the ACA continues to roll out, small business owners – especially those with more than 50 employees – are increasingly likely to turn to financial advisors for guidance. Forty-four percent of them think the ACA will be difficult to navigate and 34 percent say they’re not prepared to handle all of the changes required for ACA compliance.

Eighty-four percent of small businesses with at least 50 employees reported that they already have made health care plan changes as a result of the ACA. Among other findings:

The ACA also is changing the mix of employees at small businesses with 50 to 99 employees. Nearly one-fourth (24 percent) say they plan to replace full-time employees with part-timers and 16 percent intend to pare their workforce over the next two years because of the ACA.

“Our survey finds that many small business owners are trying to avoid the expense of offering their employees health insurance by reducing their hours to part-time or laying them off,” said Carter. “Many already have done this and more tell us they plan to do so within the next two years.”

End of Job Lock

The ACA also is likely to impact significantly how Americans approach their retirement years. Health care costs represent one of the biggest expenses individuals face in retirement. While some data points to small businesses reducing hours or employees, the ACA in some cases creates opportunities for people to retire on their terms – or open their own business.  The ACA guarantees employees cannot be denied coverage for preexisting conditions and it can help cover the cost of insurance premiums. Therefore, people may not have to work just to keep their employer-sponsored health insurance until they become eligible for Medicare at age 65.

“Employees are becoming more mobile as a result of the ACA and employers’ decisions on health insurance,” Carter said. “Because of this, an employer-sponsored retirement plan becomes a crucial benefit for retaining and attracting employees – employers also value this option as their contributions are tax deductible.”

Advisors needed

Reflecting the lack of preparedness many small business owners express,  nearly four in five (77 percent) of those with 50 to 299 employees believe retaining an advisor familiar with the ACA would benefit their company and 72 percent would like to talk personally talk to an advisor about the impact of the ACA on their company.  
“Business owners have a lot of questions regarding the Affordable Care Act. It’s important for financial advisors to explain it fully to them,” said Kevin McGarry, director of the Nationwide Retirement Institute. “Advisors will have to devise strategies that furnish further incentives to  the best employees to stay with their existing companies. Plans that allow for larger benefit contributions to certain employees will be an attractive option, as will be offering retirement benefits with greater matching contributions.”

Financial advisors can visit to learn more.

The Nationwide Retirement Institute helps financial advisors break down and simplify America’s complex retirement challenges. As a leading provider of retirement products in the U.S., Nationwide provides defined contribution and defined benefit plans to more than two million participants, representing nearly $100 billion in assets under management.


This survey was conducted online within the United States by Harris Poll on behalf of the Nationwide Retirement Institute between Oct. 7–20, 2014, among 334 U.S. small business owners with 50-299 employees and who are moderate/major influencers or primary decision makers in the selection of employee benefits for their company. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Complete survey methodology, including weighting variables and subgroup sample sizes, is available at

About Nationwide

Nationwide, a Fortune 100 company 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 both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; pet, motorcycle and boat insurance. For more information, visit


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