Benefits for Small Business: Clinton Plan Could Expand Retirement Coverage for Up to 10 Million Workers
Brown, Carolyn M., Black Enterprise
Quality employees are a company's biggest asset. The best way to attract, retain and motivate this kind of employee is to offer a solid savings and retirement plan. Still, as an entrepreneur, you're probably all too familiar with the rising costs of employee benefits. Costs are especially prohibitive if you are the owner of a small firm faced with providing a retirement plan for your employees.
Responding to the needs of small business owners and employees, President Clinton has proposed a Retirement Savings and Security Act. According to the President, the plan "helps meet the challenge of economic security for all Americans. Fifty-one million working Americans - nearly half of whom are private sector workers - are not covered by an employer-provided plan. And while most small business owners want to offer pensions to their employees, the present system is so frustrating and costly, they cannot afford to do so," says Clinton.
Currently, 76% of workers in large businesses have employer-provided pensions, while only 24% of workers in small businesses have such retirement plans. President Clinton's proposal offers a simple small business 401(k) plan, which cuts through bureaucratic red tape with a one-page form, minus complicated employer filings, calculations or testing. It would also significantly reduce administrative costs. Right now, it costs from $8 to $50 a head to administer a pension plan.
President Clinton's proposal also allows all contributions to be immediately vested and fully portable, which means that employees can take their retirement savings with them when they leave or lose their job. Employers can choose when employees are fully vested; however, some companies don't allow for full vesting until after 10 years of service. Moreover, exiting employees are required to roll over their 401(k) money - without ever touching a dime - into another retirement savings plan, or face a 20% tax fee as well as a 10% penalty for withdrawing the money before the age of 59 1/2. …