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The SECURE Act May Provide the Opportunity for Small Businesses to Participate in a Pooled Retirement Plan

August 30, 2021

By John G. Rogers, Institutional Consultant, Graystone Consulting, a business of Morgan Stanley

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019 as part of the year-end spending bill. With retirees living longer, the SECURE Act endeavors to enhance benefits from 401(k) plans and IRAs. It also helps Qualified Employer Plans provide benefits for their employees.

By now, many business owners are aware of what the SECURE Act means for their individual savings, including changes to the rules related to Required Minimum Distributions and Inherited IRAs. However, after a challenging year of navigating a global pandemic and fighting to keep their businesses alive, small business owners may not have had a chance to unpack what the act means for their company and employees.

The SECURE Act and other related government guidance could change the way employer sponsored retirement plans are administered and address many of the challenges small business owners face when they sponsor a retirement plan. Your employees are likely experiencing increased financial stress. More efficient retirement plan administration could help small businesses improve retirement outcomes for their employees.

Employees are Stressed and It’s Impacting Their Productivity

In a survey of 1,000 full-time employees, the Financial Health Network finds widespread evidence of financial fragility. Finances are the greatest source of stress for employees: 58% say their finances cause them stress, more than their work situation (51%), health issues (45%) or family issues (44%). This is true for employees at all income levels, even higher wage-earners. Fifty-two percent of employees with household income of more than $100,000 per year said that finances cause them stress.

Financial stress impacts performance at work. Nearly four in five employees (78%) who report high financial stress say that they are distracted by stress at work. Employers have an opportunity to reduce employee stress related to finances, improve retention and engagement, and set their organization apart in the marketplace by offering holistic financial wellness benefits.

Employees are Looking to Employers for Solutions

The survey finds that three out of four employees (74%) say that financial wellness benefits are important for an employer to offer, while 60% of employees surveyed say they’d be more likely to stay at a job if their employer offered financial wellness benefits that help them better manage their finances.
Small business owners recognize that it’s important to offer employees a retirement program to help them save for the future. They also know that a high-quality retirement plan can help attract and retain valuable talent as their business continues to grow.

However, administering an effective plan is complex and employers that sponsor retirement plans are fiduciaries under the law and are responsible to their employees for its care. Fortunately, the SECURE Act and related government guidance is making it easier for employers to sponsor a retirement plan.

Pooled Retirement Plans May Benefit Small Business Owners

Unlike larger companies that have extensive resources to help manage the administration and fiduciary exposure underlying their 401(k) plans, small business owners’ resources and time to focus on these important responsibilities are often limited. Yet small businesses still have the same regulatory obligations as larger organizations.

Pooled Retirement Plans offer small businesses an opportunity to band together and leverage their group purchasing power to work with service providers and ease the plan’s administrative burdens. Prior to the SECURE Act and other related government guidance, there was a lack of clarity surrounding the situations when businesses could join together to sponsor a plan. Now, there are defined rules that would allow for a group of businesses to join together under a common nexus and outsource some administrative and fiduciary responsibilities.

The Benefits of Outsourcing Administrative and Fiduciary Responsibilities Through A Pooled Plan

A Pooled Plan is designed with intent to increase efficiencies, reduce burdens on employers, manage costs more effectively, and help improve retirement outcomes for the employees. Outsourcing responsibilities can help reduce administrative and fiduciary burden for small businesses by:

• Providing added expertise—Small business can rely on experienced professionals with tailored knowledge and skills for plan administrative service and investment management.

• Helping to save time—Business owners can free up valuable time to focus on building their business by delegating plan administration duties.

• Reducing risk—Employers can shift some of the risk to designated fiduciaries along with related plan fiduciary tasks.

• Potentially reducing costs – Under certain plan structures, small businesses may benefit from cost reductions due to economies of scale.

The Bottom Line

The SECURE Act and related government guidance could make it easier for Small Businesses to manage an employer sponsored retirement plan. SBAM is in the process of researching various pooled plan structures that would benefit their members. Learn more at

John G. Rogers is an Institutional Consultant and Investing with Impact Director with Graystone Consulting – Farmington Hills, a business of Morgan Stanley. He leads the groups’ Morgan Stanley at Work financial wellness program and its mission and impact investing initiatives. John graduated from Northwestern University in 2012 with a Bachelors of Arts Degree in History, a minor in Business Institutions and a Certificate in Leadership.

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