More than 30 million Americans who work for small companies might have access to a workplace retirement plan for the first time, under an idea being promoted by Prudential Retirement.
The Prudential concept would establish a new type of retirement plan — a multiple small-employer plan, or MSEP — in which companies with fewer than 100 employees could enroll.
“It's low cost, easy to administer and it clarifies (small business plan sponsors') fiduciary responsibility,” said John. J. Kalamarides, senior vice president, retirement solutions, for Prudential Retirement, in an interview.
The idea is explained in a white paper by Mr. Kalamarides that Prudential released today.
The paper is available here.
“Participants would likewise benefit from costs savings via access to institutionally priced investments, as opposed to the retail offerings available in IRAs,” Mr. Kalamarides wrote in the paper, titled Leveraging Multiple Small Employer Plans to Close the Retirement Coverage Gap.
This new kind of defined contribution plan would hold costs down by using standardized plan designs that include automatic enrollment provisions, according to the paper.
“The pooling aspect of MSEPs would play a critical role in drawing existing record keepers and plan providers to the small end of the market, which they previously may have found uneconomical to serve,” the white paper says. “With this market generating $1.4 trillion in annual payroll, the ability to serve it profitably could attract a significant number of plan providers.”