We know that employers play a vital role in helping employees save and plan for retirement but many small businesses are unable to sponsor a retirement savings plan. The best evidence suggests that small businesses do not sponsor retirement savings plans because of administrative burdens, fiduciary and legal issues, an absence of in-house expertise, costs and fees, employee turnover and/or a high percentage of part-time workers, the uncertainly of the company’s future and higher priorities.
In fact, most private sector workers in New Jersey are employed by a small business and most of the workers employed by these small businesses have no employer-sponsored retirement savings.
In New Jersey:
• The average working family has $3,000 in retirement savings;
• 40% of households headed by a 45 to 54-year-old have no savings at all; and
• Social Security pays New Jersey residents around $1,377 a month.
Moreover, women are far more likely than men to face financial hardship in retirement. For women age 65 and older, the data indicate that their typical income is 25 percent lower than men. As men and women age, men’s income advantage widens to 44 percent by age 80 and older. Consequently, women are 80 percent more likely than men to be impoverished at age 65 and older, while women age 75 to 79 were three times more likely to fall below the poverty level as compared to men.
The retirement savings crisis in New Jersey, indeed nationally, is a blight on our economy.
But employers that compete for skilled talent and therefore are more likely to invest in that talent can make a big difference if they have access to affordable, high quality retirement savings plans.
That’s why the Employers Association of New Jersey (EANJ) formed an Association Retirement Savings Plan.
Through the plan, EANJ members help their employees achieve retirement security by participating in a customizable, fiduciary-managed, high-quality 401(k) and profit-sharing plan.
It allows employers of any size to have the same advantages as large corporations with thousands of employees. For example, big corporations with thousands of employees benefit by having much lower costs and fees per employee for their retirement plans due to the size of plan assets and economies of scale. Likewise, through the Association Plan, small and mid-sized employers can access best-in-class retirement savings funds while enjoying the lowest fees by leveraging the assets of the entire Plan to gain access to premium funds that would otherwise be closed to them because they cannot meet high minimum investment thresholds.
EANJ formed its plan under existing rules and has been in operation since 2015. It is administrated at the highest fiduciary standards and beneficiaries have the same legal protections as any 401K plan sold in the market.
Funds are also managed by investment advisors as the costs are shared among the participating employers.
For small employers the value is immediate, as they would not be able get access to the best plans because their assets are too small. For large employers with 100 or more plan participants, thousands of dollars are saved because the Plan files the necessary documents and spreads the costs of mandatory audits, legal and administrative expenses.
Congress and the Trump Administration have since enacted the Retirement Enhancement Act which makes it easier for small employers to band together to offer 401(k)-type plans, essentially adopting the EANJ association model.
EANJ was there first and we are creating enormous value for employers in New Jersey, providing business owners, their workers and their families with the best retirement savings option available. We are glad that we are setting a national trend but by faithfully serving members we are mostly helping to solve the overall looming retirement savings crisis.
More information on the EANJ Retirement Savings Plan.