Retirement programs for employees are never cheap. However, for large electrical contractors with extensive resources, such programs are feasible and are considered an important element of attracting and retaining employees.
For smaller electrical contractors, though, employee retirement programs have often simply been financially out of reach. This is about to change, though, with the implementation of a new rule from the U.S. Department of Labor that will make it easier for small businesses to offer retirement savings plans to their workers.
The primary vehicle being made available to small employers is called Association Retirement Plans (ARPs), a concept that will allow small businesses to band together to offer retirement plans to their employees.
The USDOL will allow these plans to be offered by associations of employers in a city, county, state, or multi-state metropolitan area. The employers are not required to be members of the same industries, meaning that any and all small employers in these geographical areas will be allowed to participate in an ARP. In addition, the rule allows national industry associations to sponsor ARPs for their members, if they so choose.
In addition to association sponsors, the new rule allows plans to be sponsored through Professional Employer Organizations, which are human resource companies that contractually assume certain employment responsibilities for their client employers.
According to the USDOL, approximately 38 million private sector employees in the U.S. do not have access to a retirement savings plan through their employers.
Acting Secretary of Labor Patrick Pizzella said, "Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association Retirement Plans offer valuable retirement security to small businesses' employees through their retirement years."
The USDOL added that, "By expressly permitting these new plan arrangements, the rule enables small businesses to offer benefit packages comparable to those offered by large employers. The Department expects the plans to reduce administrative costs through economies of scale and to strengthen small businesses' hand when negotiating with financial institutions and other service providers."
The rule will go into effect Sept. 30, 2019.