Many entrepreneurs want retirement benefits. But few workplaces give them access.


Many self-employed people are drawn to self-employment by the flexibility and freedom to be their own boss. But a big compromise is the lack of retirement benefits.

New research by the Pew Charitable Trusts has found that only 21.9% of non-traditional workers, defined as casual, working, alternative or self-employed, participate in a workplace-based defined contribution scheme. Defined contribution plans are those in which employees contribute, and the employer is usually what they put in, such as 401 (k) s and 4013 (b) plans. When these plans become available to them, it doesn’t take long for non-traditional workers to sign up. Of those who had access to a plan, 77.5% decided to participate. Pew Charitable Trusts surveyed 1,000 freelancers for the research.

The COVID-19 pandemic has drawn new attention to the lack of a social safety net for the self-employed and the self-employed, opening for the first time large-scale unemployment benefits for these workers. This report draws attention to another essential element of the safety net. Currently, many non-traditional workers may retire without sufficient income or social security benefits or be unable to retire due to their lack of access to employer-sponsored plans, according to the report. Some may look to Medicaid or Supplemental Security Income, “putting pressure on state and federal budgets,” the report notes.

However, a barrier to change could be the way workers are classified. As the IRS says, “Companies that offer employee benefits such as insurance, pension plan, vacation pay, or sickness pay have employees. Companies generally do not grant these benefits to independent contractors.

The research highlights an opportunity for providers who can help employers provide retirement benefits to their contingent workforce on a large scale in a way that does not require employers to change the status of these workers. In many companies, freelancers, temp workers and contractors have become an essential part of the team, but they don’t necessarily want to become traditional employees. Employers who want to attract and retain them will need to find creative solutions.

When it comes to offering retirement benefits to the self-employed, the market gap is huge. Only 46.3% of non-traditional workers were eligible for any type of employer-sponsored pension plan in the past year. Of those surveyed, 33.9% had an employer that offered a defined contribution savings plan, and only 11.3% had an employer that made them eligible for a defined benefit plan, also known as a retirement.

Two-thirds of non-traditional workers surveyed said they wanted workplace retirement benefits. It was the second most sought after benefit, after Medicare, that 76.6% wished they had.

“Solutions are needed to provide retirement savings opportunities directly and effectively to all workers,” insist the report’s authors. “If given the opportunity, many workers will save. ”

Fortunately, some freelancers seem to be bridging the gap by assembling hybrid careers. They could juggle several freelance projects with a traditional part-time job that offers benefits. Among freelancers with traditional jobs, 69.7% had access to a pension plan. It was not clear whether they chose these traditional jobs primarily to become eligible for benefits – as some do to gain access to group health benefits – or if there were other main factors.

In the absence of a complete solution to help free agents at this time, Pew Charitable Trusts suggests a few solutions:

State-facilitated self-ARI programs, which private sector employees could join if they did not have a work plan

· Encourage savings through the tax system, financial institutions or fintech applications.

While individual entrepreneurs have access to savings vehicles like IRAs and 401 (k) solo, many who are busy making a living never manage to research or set them up. Having some type of large-scale solution available to all non-traditional workers could keep many people from struggling financially as they reach the years when many people retire.

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