Small business owners overwhelmingly see the value of offering a retirement plan. But keeping one affordable and sustainable as the business grows can be another matter.
In a recent Employee Benefit News opinion piece, James Hobson, CEO of Ubiquity Retirement Savings, argues that the way retirement plans are priced deserves more attention, particularly among small businesses operating with tighter margins and leaner HR teams.
According to a recent Ubiquity survey cited by Mr. Hobson, 94% of employers said offering a retirement plan is important for attracting and retaining employees. Yet 62% had taken no steps to improve their retirement benefits over the past year.
Mr. Hobson points to cost uncertainty as one possible reason for that disconnect.
Many retirement plans use asset-based pricing, meaning fees increase as plan assets grow. While that model is common, Mr. Hobson argues that it can make future costs harder for small business owners to predict. As participation and assets increase, so can plan expenses.
But pricing is only part of the challenge. Small employers also have to sort through vendors, changing regulations, plan design decisions, and compliance requirements, often without the benefit of a large HR or benefits team.
That creates an opportunity for retirement plan advisors to play a larger role.
Rather than simply helping employers select investments or meet compliance requirements, Mr. Hobson sees advisors increasingly helping small businesses evaluate the long-term economics of their retirement plans. That includes understanding how different pricing structures work, identifying potential cost barriers, and helping business owners determine whether their plan remains financially sustainable as the company grows.
One model Mr. Hobson believes deserves consideration is flat-fee pricing, where plan costs remain consistent rather than rising alongside plan assets. For small business owners, he argues, knowing what a retirement plan will cost from year to year can make budgeting easier and help position the plan as a long-term investment rather than an unpredictable expense.
That doesn’t necessarily mean flat-fee pricing is right for every employer. As Hobson acknowledges, businesses differ in size, workforce makeup, and growth trajectory.
But his larger point is worth considering: The cost of a retirement plan isn’t just about what an employer pays today. It’s also about whether the business can comfortably continue offering the benefit as the company and plan grow.
For advisors working with small business retirement plans, pricing structure may become an increasingly important part of the conversation. Helping employers understand not just what their plan costs but also how those costs could change over time can help them make more informed decisions about a benefit they hope to maintain for years to come.
