Small business

Retirement Spotlight: Legislative Support for Small Businesses During Coronavirus Pandemic

Many U.S. businesses—large and small—are experiencing uncertainty and varying levels of hardship as they try to stay afloat during the coronavirus (COVID-19) pandemic. Hit particularly hard are small businesses and their workforce, which according to the Small Business Administration (SBA) encompasses 99.9 percent of U.S. businesses and represents nearly half of the U.S. private sector workforce. What lies ahead for the economy during 2020, and maybe even 2021, is surely unknown as these are unprecedented times. In the meantime, the federal government is deeply involved in helping to stabilize the economy until it can be opened up fully again.

Four bills have so far been enacted to help U.S. businesses and workers survive this time of turmoil, and more are expected. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and authorizes the SBA to administer the Paycheck Protection Program (PPP). The PPP provides federally guaranteed, low-interest loans to businesses with 500 or fewer employees, and it includes the potential for loan forgiveness. The program’s key purpose is to keep employees on business payrolls during this unprecedented economic downturn. Specifically, the PPP loans help employers meet payroll (and certain other operating) costs during the eight weeks after the loan is disbursed. Among other things, approved payroll costs include wages (and withheld taxes), leave payments, and employee benefits such as retirement benefits and group healthcare coverage.


Second PPP Legislative Action

In the first PPP bill, the CARES Act provided approximately $350 billion in small-business loans. The program was so popular that the funds were depleted by mid-April. Subsequently, on April 24, the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266) was signed into law, adding another $320 billion to the program, which includes $60 billion earmarked specifically for PPP loans to be administered through small, medium, and local financial institutions, like credit unions and community banks. The intent was to provide access to PPP loans to traditionally underserved businesses.


General Terms of the Loan

The PPP is administered by the SBA, but loans are obtained through financial organizations. Businesses with no more than 500 employees—including not-for-profits, sole proprietors, and independent contractors—can apply for the PPP loans through approved lenders. If the employer follows certain requirements, the loan will be forgiven and considered tax-free.

No collateral or personal guarantees are required, and neither the government nor lenders will charge small businesses any fees. PPP loans that are not forgiven must be repaid within two years at a one percent interest rate, but any loan repayments will be deferred for six months. Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. The amount of the loan forgiven will be reduced if full-time headcount declines or if salaries and wages decrease.

Specific details of the program and information on how to apply can be found at the SBA website. Small-business owners may find it helpful to confirm whether the financial organizations they currently do business with are participating in the program.


PPP Loan Payroll Costs Include Retirement and Health Coverage

In an interim final rule and FAQs issued in April, the SBA confirmed that eligible payroll costs include a number of employee benefits, including among other things, employer contributions to defined contribution or defined benefit retirement plans,  group healthcare coverage (including payment of premiums), and certain parental, family, sick, and medical leave (with some exceptions if certain tax credits are claimed). Employees that are furloughed but remain on the payroll could presumably continue their salary deferrals to retirement accounts as well as their portion of health coverage and contributions to health savings accounts (HSAs), at their option. Employers may also continue their retirement contributions to these accounts if such contributions would be considered qualifying payroll expenses for the eight-week period.


Loan Forgiveness

Perhaps the key feature of the program is loan forgiveness. If program rules are followed, the PPP provides for forgiveness of the loan—up to the full principal amount plus accrued interest. Loans will generally be forgiven if employees are kept on the payroll for eight weeks following the loan date and if the loan assets are used for payroll, rent, mortgage interest, or utilities. The amount spent on payroll costs will determine how much of the loan can be forgiven; no more than 25 percent of the forgiven loan amount can be for non-payroll costs.

In addition to retirement contributions and healthcare and certain leave benefits, payroll costs also include the following.

  • Salary, wages, commissions, and tips up to $100,000 of annualized pay per employee
  • Allowance for dismissal or separation
  • Payment for vacation, parental, family, medical, or sick leave
  • State taxes and local taxes withheld from the employee’s compensation
  • Payments of compensation or income to a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment not more than $100,000
  • Excluded are qualified sick leave and qualified family leave for which credit is claimed under the Families First Coronavirus Response Act (FFCRA); compensation paid to an employee whose principal residence is outside the United States; and the employer portion of payroll taxes (FICA), Railroad Retirement Tax (RRTA), and federal employment taxes

The $100,000 per-employee limit on annual payroll expense does not apply to non-cash benefits such as employer contributions to qualified retirement plans, health benefits, and taxes withheld from employees’ pay. The borrower may also use up to 25 percent of the funds for mortgage interest, rent payments, or utility payments if the indebtedness or service started before February 15, 2020.


Strong Cautions for Employers: Consult Your Tax or Legal Adviser and Your Lender

The employer is required to document and certify to the lender that the loan funds were used to retain workers and to maintain payroll or make mortgage interest, lease, and utility payments for the eight-week period following the loan in order to qualify for loan forgiveness. The SBA has also indicated it will release additional guidance regarding loan forgiveness. Because these loans may be used cover a variety of expenses, employers should work with their tax or legal advisors and the PPP lender in determining how to qualify for loan forgiveness.


Click here for a printable version of this issue of the Retirement Spotlight.

Rick Irace Discusses Advisor Opportunity with Small- and Mid-Sized Retirement Plans

In a recent Employee Benefit Adviser article, reporter Lee Conrad provides a summary of the NAPA 401(k) Summit panel session that Rick Irace co-presented with Richard Schwamb, a financial advisor from Morgan Stanley. Rick commented on small businesses’ challenge to offer quality retirement plans to their employees and the business opportunity this presents to advisors. Stressing the importance of features like auto-enrollment, Irace explained that helping these employees obtain financial wellness is gratifying work. “If you really want to help people, this is a place you can do it,” Irace says.​

Rick Irace Comments on Ascensus’ Financial Wellness Program

In a recent Employee Benefits News article​, Rick Irace discusses the motivation behind Ascensus’ newly implemented financial wellness program through Financial Finesse, as well as some initial results. “The research is showing us that Americans are anxious about their finances,” Irace says. “We also know people can outlive and are outliving their money. Nearly half of employees say they are stressed out by their financial situation… and over 77% say they spend three hours or more at work thinking about it or dealing with financial issues.”​

Rick Irace Discusses the “Quality Deficit” Among Small Retirement Plans

In a recent article published by Wealth Management, Rick Irace, chief operating officer of Ascensus retirement,  cites several points as evidence of a “quality deficit” for small  retirement plans versus their large market counterparts. As for closing this gap, Irace suggests that small business owners consider consulting with a third-party administrator (TPA). “I do think that for the sponsor that’s really concerned about administrative burdens and other things, the TPA can…step in and consult on specialized plan design. They can talk about technical details in a way that’s much easier understood for the sponsor and their employees,” adds Irace.

Workplace Benefits for Small Businesses and Non-Traditional Workers

With Small Business Saturday just behind us, we wanted to consider the distinctive challenges that this growing segment of workers faces and the unique opportunity that these challenges present for financial advisors.

Fifty-nine million American workers, 47.5% of the U.S. workforce, are employed in small business. This includes a growing number of professionals in the emerging “gig” economy, where temporary positions are common. These small market workers struggle to receive the same salaries, employer-based benefit plans, and insurance as employees at larger companies.


Public Policy Responds

The government is responding to this workplace challenge with new retirement plan solutions at both the state and federal level.

  • State-facilitated retirement programs—recently initiated in California, Oregon, Illinois, Connecticut, Maryland, and the City of Seattle—are on track to reduce the nation’s plan coverage deficit by 17%.
  • Congress is considering proposals to loosen membership restrictions for multiple-employer plans (MEPs), which would enable more small businesses to jointly sponsor a retirement plan. MEPs could lessen both costs and the administrative burden for small business owners looking to offer a plan.


Service Providers Offer Additional Solutions for Small Employers

Advisors, plan recordkeepers, and third-party administrators are also using their professional expertise and evolving technologies to close the retirement plan coverage gap. Their services are making it easier for small businesses to sponsor plans and improve employee savings outcomes.


Collaborating with Third-Party Administrators

To address business owners’ concerns about the time and resources required to administer a plan, advisors can partner with a local TPA. TPAs can consult on specialized plan design, translating technical details into more easily understood benefits for both the sponsor and employees


Outsourcing Administrative Functions

More small employers are outsourcing the administrative functions surrounding fiduciary compliance with Section 3(16) of the Employee Retirement Income Security Act. This ensures that their plan operations are compliant with regulatory mandates.


Choosing Cash Balance Plans

Cash balance plans combine the portability, flexibility, and simplicity of 401(k) plans with the high contribution limits of traditional defined benefit plans. Today’s cash balance plans have more than $1 trillion in assets, an increase of 61% since 2010.


Comparing Pricing Models

Small businesses are collaborating with advisors to determine the best retirement plan pricing structure for their company’s needs: asset-based or flat-dollar, per participant tiers. To demonstrate the impact of these different structures on a plan’s market value, advisors can use our plan comparison tool. It allows them to run a custom illustration for their clients’ plans.


The Essential Role of Purpose-Built Firms

Small employers and their advisors need recordkeepers that build modern best practices into their service model while offering expertise, technology, versatility, and independence. These purpose-built firms create greater efficiency for advisors and provide necessary support as financial services for the changing workplace continue to evolve.

To find out more, download the full whitepaper or contact an Ascensus representative today.

Ascensus White Paper Explores Opportunity to Address the Small Business Retirement Savings Deficit

Public Policy and Industry Solutions Taking on Retirement Plan Coverage and Quality Deficits

Dresher, PA — Ascensus—whose technology and expertise helps millions of people save for retirement, education, and healthcare—has released a white paper exploring recent innovations in both the public and private sectors that are addressing coverage and quality deficits in retirement plans for small business employees. In Focus: The Small Business Opportunity discusses the scale and impact of these enhancements on the retirement industry, financial advisors’ practices, and the financial lives of millions of Americans.

Small businesses play a critical role in the U.S. economy, employing about 47.5% of the U.S. workforce. The paper notes that the ranks of small business employment are increasingly accounted for by professionals, tech-centric entrepreneurs, and business owners over age 50. However, the small business segment has traditionally struggled to provide retirement plans for employees.

“Research suggests that small businesses are hindered by ‘twin deficits’ of both quality and coverage,” states David Musto, president at Ascensus. “Many small businesses have no workplace retirement benefit coverage at all—and those that sponsor plans struggle with cost and complexity.”

The white paper notes that a confluence of public policy solutions, industry best practices, and new technologies are being brought to bear to address the workplace savings challenge. In the public sector, new state-facilitated retirement programs have been or will be initiated in California, Connecticut, Illinois, Maryland, Oregon, and the city of Seattle. At the same time, Congress is considering long-discussed proposals for open multiple-employer plans that would allow small employers to jointly sponsor retirement savings plans.

Private Industry Solutions and Best Practice

For their part, plan recordkeepers, advisors, and third-party administrators (TPAs)–together with a steadily evolving array of technologies–are driving the evolution of solutions that make it easier for small businesses to sponsor plans and to improve outcomes for employees.

– Advisors are playing a critical role in assessing, navigating, and guiding small business plan sponsors through the increasingly complex range of choices they face in offering retirement benefits that can boost productivity and help with employee recruitment and retention.

– TPAs are collaborating with plan sponsors and their advisors to streamline regulatory disclosure and compliance and to evolve new technologies and more secure data solutions.

– Plan sponsors are increasingly outsourcing administrative functions associated with fiduciary compliance with Section 3(16) of the Employee Retirement Income Security Act (ERISA) in order to ensure that plan operations are consistent with regulatory mandates.

– To enhance savings levels for employees, small business owners are increasingly turning to Cash Balance plans, a hybrid savings mechanism that combines the flexibility and portability of 401(k) savings with the high contribution limits associated with traditional defined benefit plans. Cash Balance plans today top $1 trillion in assets under management, an increase of 61% over the past eight years.

– As the industry continues to experience consolidation among multi-purpose financial services firms, “purpose-built” firms wholly dedicated to the retirement plan marketplace are becoming providers of choice. These firms bring deep expertise in small and start-up plans, offering plan design consultation, investment flexibility, and scalable technology that enables them to service these plans efficiently.

“Small business owners and employees are at the cusp of a new world with multiple opportunities to join the workplace savings mainstream,” continues Musto. “Financial advisors, TPAs, recordkeepers, and other providers are re-defining retirement plan best practices for small businesses, dynamic contributors and vitally important innovators in the American economy.”

To download In Focus: The Small Business Opportunity, visit


About Ascensus
Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit View career opportunities at

David Musto Discusses How Public and Private Sectors Are Addressing Small Business Retirement Plan Needs

In a recent PLANADVISER feature, President David Musto discusses the vital role of small businesses in the U.S. economy and the challenges they’ve historically faced in offering cost-effective retirement benefits.

The total number of American workers without access to an employer retirement plan is 55 million. They comprise the “coverage gap,” which is well-known in the industry. “Less known is the ‘quality gap’ between the thousands of small business plans that do exist and their large business counterparts,” states Musto.

He recaps recent innovations in the public and private sectors that are addressing these “twin gaps” and the impact of these enhancements on financial advisors’ practices and the financial lives of millions of Americans.