A New Retirement Solution for California's Small Business Owners

It’s no secret that saving for retirement can be a challenge for small business owners and their employees. Many small businesses lack the resources to provide employer-sponsored retirement plans that large businesses offer, which puts them at a competitive disadvantage when it comes to attracting and retaining top employees. The good news is that there’s a policy solution to this problem: the California Secure Choice Savings Program, created by the state legislature, offers a simple way for small businesses to provide a retirement savings program to small business employees.

There’s no doubt that today’s workers are concerned about retirement, and that retirement benefits are crucial to companies’ ability to build a talented workforce. A Towers Watson survey found 63 percent of workers younger than 40 agreed their retirement program was an important factor in accepting their job in 2011. Unfortunately, too many small businesses can’t afford to set up an employer-sponsored retirement plan. In fact, 77 percent of the 7.5 million Californians who don’t have access to employer-sponsored plans work for small businesses with fewer than 100 employees. Small business owners who can’t offer retirement plans due to a variety of barriers know this puts them at a disadvantage in hiring talented workers and keeping their employees happy.

The California Secure Choice Savings Program can play a huge role in solving this problem by creating a voluntary, portable retirement savings program that would allow employees to more easily save for their financial future. The program would be managed by the state, which would reduce liability for employers. Employees would be automatically enrolled in the program and contribute to their savings account through payroll deductions, but could opt out anytime.

This program is slated to be simple and effective, which helps explain why small business owners enthusiastically support it. Polling from Small Business Majority and AARP found two-thirds of small business owners in California support a state retirement savings program that would help small businesses and their employees save for the future. Nearly three-fourths of respondents think offering such a program would give their business a competitive edge.

Our small businesses are our nation’s primary innovators and job creators, but they can’t be successful if they don’t have the tools to remain competitive in today’s economy. The California Secure Choice Savings Program will help small business owners provide their employees with an affordable retirement plan so that they can focus on running a successful business instead of worrying about retirement. While the exact details of the program are still being finalized, small business owners and their employees have good reason to be excited about this new retirement option.