The U.S. Chamber of Commerce is working to close the retirement coverage gap by bringing together small businesses, service providers, and state and local chambers.
The effort comes on the heels of a Department of Labor rule finalized in September allowing businesses to band together to offer employees defined contribution plans, under limited circumstances. The rule, which was proposed in October 2018, lays out a host of conditions groups or associations must meet to be permitted to sponsor multiple employer plans, including a requirement to have at least one substantial business purpose unrelated to offering employee benefits to its employee members, and one that requires sponsors to have members with a commonality of interests with respect to their industry or location. The plans could be offered by employer associations in a city, county, state or a multistate metropolitan area, or in a particular industry nationwide.
While the U.S. Chamber of Commerce cannot offer an association retirement plan, state and local chambers can.
"If the state and local chamber takes on a lot of the responsibilities for setting up those plans, it really frees up the time and effort for the small employers to make sure that their employees have a retirement plan but that small employer is not taking on all the compliance obligation, all the legal liabilities," said Chantel Sheaks, executive director of retirement policy at the U.S. Chamber of Commerce in Washington.
The U.S. Chamber has launched what Ms. Sheaks calls a "portal" for chamber members interested in learning more about association retirement plans and connecting small employers with local chambers and service providers.
The portal is currently live, but Ms. Sheaks said it's still in its early stages as the U.S. Chamber amasses more stakeholders interested in participating.
"What we're hoping to do over time is build that up to have a tool and resource area for chambers and also the general public so they can understand what association retirement plans would do for them, how they work and how you'd get into one," Ms. Sheaks said.
In recent years, the rise in litigation against retirement plan fiduciaries has been an impediment for small employers considering starting a plan, but the main culprit is costs, according to Ms. Sheaks.
A survey of small business owners published in April from SCORE Association, a non-profit organization devoted to mentoring small businesses, found that 71% of businesses that do not offer retirement plans report that plan setup is too expensive and 63% do not have the resources to administer such plans.
In announcing its finalized rule in September, a senior Labor Department official said the rule is expected to reduce administrative costs through economies of scale and strengthen small businesses' hand when negotiating with financial institutions and other service providers.
"Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans," said Patrick Pizzella, then-acting secretary of labor and current deputy secretary, in a news release accompanying the final rule. "Association retirement plans offer valuable retirement security to small businesses' employees through their retirement years."