What the New Executive Order for Retirement Plans Really Means

President Trump signed signed an Executive Order on August 31st, directing the Department of Labor and the Treasury, “… to consider issuing regulations and guidance that would make it easier for businesses to offer retirement plans.”

The focus here is mainly on reevaluating and making changes to make the process easier for small businesses to adopt Association Retirement Plans (ARPs), or Multiple Employer Plans. According to the White House press briefing, “Seventy-one percent of small and medium sized businesses that do not offer workplace retirement plans reported that high costs deterred them from doing so.”

It’s a big problem and while this may not be a dream solution for everyone, it’s a pretty darn good one. It reduces the high costs that traditionally deter small businesses from offering plans by making it super easy for small businesses to band together like a rag tag team of little league misfits that go on to win the gold medal in the Olympics:

Making it easier for small businesses to offer retirement plans to their employees does a lot of good things. First of all, it helps solve the problem of too many Americans without any kind of future security lined up at all. Second, for small businesses it allows them to stay competitive in their market by being able to offer this kind of security and benefits to their employees. They can retain top talent without taking on the traditionally steep overhead costs that come with offering retirement plans as a small businesses, on your own.

Just to reinforce how serious of a problem this has been and is for small businesses in America, here’s two more statistics from the press briefing:

  • Only 53 percent of workers at establishments with fewer than 100 workers are offered a workplace retirement plan

  • Thirty-seven percent of small and medium sized businesses cited high costs as their main reason for not offering a plan

Now, if this all goes through, the devil will (of course) be in the details. Multiple companies banding together for purchasing power in a retirement plan may not be all it’s cracked up to be once you get down to building everything. Like the current system and current multiple employer plans, it will have its flaws that will need to be weighed against the positive benefits.

One other important item is that the order asks for examining disclosures and considering electronic delivery (instead of paper). Oh my, how this would help reduce cost!! Fingers crossed, folks.

Let’s just hope that the directed review of current regulations results in practical changes, both for small businesses and their employees.