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401(k) Plans Help Small Businesses Attract and Retain Talent, Yet Many Aren’t Investing

New study shows small business owners recognize the benefits of 401(k)s, but most don't think they qualify for a plan

SEATTLE – July 11, 2017 – Increasingly small businesses are looking to 401(k) plans to attract and retain talent and boost confidence about their future, according to the Spark 401k Small Business Retirement Planning Index.  

The national survey of small businesses found 94 percent of small business owners (SBOs) who offer a 401(k) say it drives employee recruitment and retention, up from 89 percent in 2013; and 86 percent of SBOs with a plan are confident they are saving enough for retirement, an increase from 82 percent in 2013.

Meanwhile, continued misperceptions about plan access and costs prevent many SBOs from investing. The survey showed that 59 percent of owners who don't offer 401(k) plans believe their business is too small to set one up, 22 percent say they can't afford matching contributions, and 16 percent believe plan costs are too high. Nearly half (47 percent) of all SBOs are saving less than 10 percent of their income for retirement, with a quarter saving nothing at all.

"While it's encouraging to see more small businesses reaping the benefits of 401(k)s, it's clear misperceptions and myths are preventing many owners from starting a retirement plan," said Stuart Robertson, president of Capital One Advisors 401k services, which oversees Spark 401k's suite of all-ETF 401(k) plans. "We want every business owner, including the self-employed, to know that no business is too small for a 401(k), contribution matching is not required, and low-cost plans are available."

 Following are key themes uncovered by Spark 401k's Small Business Retirement Planning Index.

 Savings rates are down, despite many SBOs feeling confident about their retirement plan.

  • While 62 percent of SBOs say they're confident they're saving enough for retirement, nearly half (47 percent) are saving less than 10 percent of their income and one-quarter aren't saving at all.

  • Many SBOs are saving less than they did four years ago – 47 percent have saved a nest egg of $100,000 or more, compared to 59 percent who saved at least that amount in 2013.

  • Confidence increases when SBOs have a 401(k) plan; 86 percent with a 401(k) are confident they are saving enough for retirement.

  • Female SBOs are more likely to say a 401(k) has boosted their confidence (55 percent), compared to male owners (47 percent).

    401(k)s support employee recruitment and retention, and help boost the bottom line.

  • Ninety-four percent of SBOs who offer a 401(k) say it drives recruitment and retention, and about half report it helps attract better quality employees (52 percent) and inspire increased employee engagement (47 percent).

  • A quarter (27 percent) of SBOs who offer a 401(k) say employee demand played a role in establishing a plan (up seven percentage points from 2013).

  • Half (48 percent) of SBOs with 2-50 employees say departing employees have said a lack of retirement benefits influenced their decision, and those owners say it costs a quarter (26 percent) of the employee's salary to replace them.

  • A third of owners with a 401(k) say it has reduced personal taxes (35 percent) and business taxes (31 percent).

     Myths and misperceptions about plans continue to prevent many from setting up a 401(k).

  • Most SBOs (59 percent) without a 401(k) think their company is too small to offer a plan, and two-thirds (67 percent) of owner-only businesses believe they're too small to access a plan, as do 54 percent of business with two to 50 employees. 

  • Nearly a quarter (22 percent) of SBOs who don't offer a plan say they can't afford matching contributions and 16 percent think plan costs are too high.

  • More than a third (39 percent) of SBOs plan to fund their retirement by selling their business. More than half (52 percent) of SBOs with revenues of $500,000 or more say they'll sell their business to fund retirement.

  • A quarter (23 percent) of SBOs believe five to nine percent is a fair amount to pay in 401(k) expenses; only 10 percent think fees of one percent are fair.

  • A third (31 percent) of SBOs without a plan say they would consider offering a 401(k) if tax benefits existed and a quarter (27 percent) would reconsider if plan costs were lower.

"Meaningful tax benefits and low-cost all-ETF 401(k)s that keep investment expenses under one percent are available, and can empower more Americans to affordably build their nest egg, providing them options on how they want to spend their retirement years," said Robertson. "Here at Spark 401k, we're committed to partnering with more small businesses so they can gain peace of mind and take control of their financial future."

Survey Methodology
The Spark 401k Survey was conducted by Wakefield Research ( among 500 U.S. business owners at companies with 1-50 employees between May 5th and 18th, 2017, using an email invitation and an online survey. Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 4.4 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample. 

About Spark 401k
Spark 401k provides streamlined, cost-efficient 401(k) retirement plans for tailored for small businesses. Spark 401k offers a suite of easy-to- access services that make it simple for employers and employees to open and manage their retirement plans online at Spark 401k plans provide low-cost investments and model portfolios that simplify investment selection to help them get on track with their retirement goals. Plan sponsors can take advantage of customer success managers and customer care agents to receive assistance in choosing and managing their retirement benefits.

About Capital One Advisors
Capital One Advisors, LLC ("COA") is a Washington Limited Liability Company that is registered as an investment adviser with the SEC. We provide affordable 401(k) investment advisory and ERISA 3(38) services to businesses and offer investment advisory services to retail clients.

Investment products are offered by Capital One Investing, LLC, a registered broker-dealer and Member SIPC. Investment advisory services are provided by Capital One Advisors, LLC, an SEC-registered investment advisor. Insurance products are offered through Capital One Agency, LLC. All are subsidiaries of Capital One Financial Corporation.

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