At any given time, only about half of U.S. private sector workers are covered by an employer-sponsored retirement plan. As a result, roughly one-third of households end up completely reliant on Social Security at retirement, while others move in and out of coverage throughout their careers and end up with only modest balances in a 401(k) account.
The lack of consistent coverage – a pressing concern for the nation’s retirement income security –is driven by small employers. Small employers, defined here as those with fewer than 100 employees, account for the vast majority of businesses and 35 percent of private sector workers. However, only about half of small employers offer a retirement plan compared to about 90 percent of employers with more than 100 workers. In an effort to lower the cost for small employers of providing a retirement plan and thereby reduce the coverage gap, the SECURE Act of 2019 made Multiple Employer Plans (MEPs) less restrictive and potentially more attractive for this group. This primer explores both the possibilities and the limitations of MEPs in improving coverage in employer-sponsored retirement plans.
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