This is a great article on the question of why smaller businesses do not offer retirement plans. I recommend reading it, and won’t simply restate its findings here, but instead want to add two thoughts.
First, there are many important issues in the world when it comes to retirement security for employees, but the lack of access to retirement plans in many smaller businesses is as important as any of them. Although there is room for debate over how exactly to interpret the data on small business employment, there is no question that vast numbers, and a very high percentage, of employees in the United States work for small companies. Simple logic tells you that, if small businesses either cannot or simply are not providing retirement plans, large numbers of employees then have no access to employer provided plans. That cannot help with retirement security in this country.
Second, the article omits one barrier to small companies providing retirement plans, which I have found time and again in my practice, namely, the difficulty for small businesses in accessing quality third party administrators and other resources. Every vendor wants to land a big employer as a client, but not all are prepared to or interested in servicing small shops with correspondingly small plans. This often leaves smaller companies to use weaker vendors, leading to increased mistakes and other problems with administration (leading then, in turn, to unexpected legal and compliance costs for small employers seeking to provide retirement plans). To be clear, I in no way mean to suggest that all, or even a majority, of vendors targeting the small employer market are deficient, and I admit that selection bias guarantees that I see a disproportionate share of poor quality vendors in my cases. However, there is also no question that this is, in fact, yet another barrier to providing retirement plans for the employees of small companies.