New Rules Could Ease Small Business 401(k) Offerings
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What is the Money Briefing and who is hosting this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. A large percentage of small businesses have not had the money or the manpower to offer 401k savings programs to their employees. Well, that could change very soon. We'll have details in a moment. First, these money and market stories you should know. Wells Fargo has agreed to pay a $65 million fine to settle claims brought by the New York Attorney General's Office of the bank misled investors about its cross-selling tactics, where bank employees made as many as 3.5 million potentially unauthorized accounts to try to hit sales goals. The Attorney General's office says it is still looking at what it calls Wells Fargo's illegal business practices of opening millions of unauthorized accounts and enrolling consumers in services without their knowledge or consent.
The company didn't admit liability and said the settlement costs had been previously accrued. And Wall Street Journal economics reporter Laura Casisto reports the housing market is stumbling through its longest slump in four years as the divergence between a booming U.S. economy and weakening home sales that many had dismissed as temporary now looks to be in position to continue. It's triggered by a combination of rising mortgage rates and high home prices, a lack of inventory, a new tax law that reduces incentives for homeownership. that have weighed on the housing sector this year. And even though September saw rising housing inventory levels, the National Association of Realtors says that fewer people attended open houses.
That shows demand could be faltering and that some potential buyers might be giving up, at least for now. Economists said that rising home prices, which are up more than 50% nationwide since prices bottomed out in 2012, have been a drag on the housing market.
How many workers lack workplace retirement access and how is that linked to small businesses?
And recently mortgage rates have been shooting higher. up roughly a percentage point this year to nearly 5%.
Up to now, it's been a challenge for small businesses to offer 401k plans to employees, but that could change thanks to a new crop of proposed rules. And Wall Street Journal retirement reporter Ann Tergesen is here with details.
What recent Wall Street Journal news items set the stage for this discussion?
So Ann, has it been a matter of expense that has kept small businesses out of the 401k arena?
That's a large part of it. I think it's also kind of a hassle for, you know, small business owners who really are often just focused on, they're trying to focus on making their business work. You know, it's just an extra thing for them to do. But yes, I mean, costs can make a big difference. Small plans tend to be very expensive compared to the plans that companies like IBM can offer their, you know, thousands of employees.
And small businesses not being able to offer 401k plans, that's contributed to a substantial number of Americans not having a reliable retirement savings instrument to prepare for in the years after working.
Yeah, about half of private sector workers don't have access to a 401k plan at work or a retirement savings plan at work. And a large portion of that stems directly from the small company market. So, you know, this has been something that policymakers have been concerned about for years.
Why have many small businesses historically not offered 401(k) plans to employees?
There's been a number of efforts to try to solve the problem of small businesses that don't offer plans in the past. And, you know, largely they've been unsuccessful. So this is sort of the latest effort.
It caught the attention of the White House. The rules are also the result of involvement by the Trump administration, and they see preparation for retirement as a major issue.
Right. So at the end of August, President Trump issued an executive order instructing various departments, including the Labor Department, to see what they could do about some of these issues. I mean, he specifically directed them to look at a specific type of solution to the problem of small companies not offering programs. And so that's been something that's been on the agenda for the White House. And as a result, it's on the agenda for the Labor Department, which issued this regulation today.
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Chapters
4 chapters
1
What is the Money Briefing and who is hosting this episode?
0:05–1:48
2
How many workers lack workplace retirement access and how is that linked to small businesses?
1:48–2:14
3
What recent Wall Street Journal news items set the stage for this discussion?
2:14–3:10
4
Why have many small businesses historically not offered 401(k) plans to employees?
3:10–6:51
Speakers
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