Small businesses have responded enthusiastically to changes in last year's law letting them offer easy-to-administer IRAs and 401(k) plans, a survey shows.
The survey from the Investment Company Institute, Washington, shows eligible businesses (with fewer than 100 employees) had established 18,303 SIMPLE plans between January - when the law kicked in - and July 31. Individual retirement accounts have been the plan of choice: Employers set up 18,261 SIMPLE IRAs, vs. 42 SIMPLE 401(k)s.
"The product seems to be selling extremely well, well beyond our expectations," said Russ Galer, associate counsel of pensions at the mutual fund industry trade group.
Under the new law, small businesses may offer the savings incentive match plan for employees, or SIMPLE plans, if they do not offer any other retirement plans. Employees may set aside up to $6,000 in tax-deductible contributions. Employers can choose to either provide a 3% matching contribution, with the flexibility of dropping that to 1% in no more than two of five consecutive years, or give all employees a 2% contribution regardless of whether they put in any of their own money.