401k © Tom Grill, Corbis

Retirement crisis? More like a catastrophe for the 50% of U.S. workers who don't participate in a savings plan at work, many of whom work at small companies nationwide. Those businesses face steep hurdles in providing retirement plans to their workers, according to a new report -- and without such plans, it's even more challenging to save enough to retire.

Just 5% of businesses with one to four employees offer a workplace retirement savings plan, according to the report by the Government Accountability Office, or GAO, the investigative arm of Congress.

The numbers aren't much better for slightly bigger businesses: 18% of firms with five to 11 employees, 26% of businesses with 12 to 25 workers, and 31% of businesses with 26 to 100 workers sponsor a workplace retirement plan, according to the report, which cites Labor Department and Internal Revenue Service data.

"There are a lot of people who really are looking forward to a retirement with not much more than Social Security," said Charles Jeszeck, author of the report and director of the education, workforce and income security team at the GAO.

It isn't as though workplace savings plans are a retirement-crisis panacea. In fact, some workers who have access to a plan at work don't even take advantage of it -- often because they simply can't afford to save. Nine percent of workers at businesses with 100 or fewer employees that offered a workplace plan chose not to participate, according to a 2009 report by the U.S. Small Business Administration.

Yet a 401k is a valuable tool for most savers. While those without a workplace plan can opt to set up an IRA, it's a more cumbersome process. You must choose a provider, set up your plan and then make regular contributions to it -- hurdles that can waylay would-be savers.

A workplace plan such as a 401k, meanwhile, is easily accessible, and paycheck deductions simplify matters. Plus, for those who can afford it, 401k's and similar plans allow workers to set aside as much as $17,500 per year on a pretax basis -- and even more, for those over age 50 -- versus the $5,500 annual contribution limit for IRAs in 2013.

401k costs, complexity are hurdles

While large firms are far likelier to offer the benefits of a workplace plan, it's not like you can blame small-business owners who fail to offer a 401k to their workers. They're busy trying to run a business, and creating a retirement-savings plan is complex and time-consuming.

Some of the difficulties business owners cited include the cost of starting a plan, the complexity of choosing investment options for their workers, and the fear of failing to meet their fiduciary responsibilities and facing litigation as a result, according to the GAO report. Read the report as a PDF here.

Small-business owners also cite a lack of worker interest as a reason for failing to start a plan, or for closing their plan. And they say that health-care benefits trump retirement benefits, the report said. When a small business reaches the point where it's making enough money to offer benefits to workers, the first step is usually a health-care plan, the report said. (At this point, it's unclear how and to what degree the Affordable Care Act might change that, Jeszeck said in a telephone interview.)

For this new publication, the GAO compiled data from a number of its recent previous reports and presented it as testimony to the Senate Committee on Health, Education, Labor & Pensions, in a hearing on "Closing the Retirement Plan Coverage Gap for Small Businesses." Watch the July 16 hearing here.

What's next?

A number of proposals in recent years -- including making it easier for workers to contribute to an IRA and making the retirement savers' tax credit refundable -- have the goal of getting more workers to save for their retirement, but those proposals haven't gained much ground.

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"Congress for the last couple of years has focused on the budget. Now there's a big focus on immigration, the debt ceiling -- those more global issues pretty much have gotten the limelight," Jeszeck said.

At the Senate committee hearing, "multiple-employer plans," or MEPS, were discussed as one way to expand coverage among small-business owners. With MEPs, a third-party company pools the retirement-plan assets of a number of employers, thus taking the administrative load and other time-consuming plan tasks off the shoulders of business owners, and potentially reducing overall costs. MEPs have existed for decades, though there's not a lot of data on them, Jeszeck said.

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According to the GAO report, "MEP representatives have suggested MEPs as a viable way for small employers to reduce the administrative and fiduciary responsibilities that come with sponsoring a pension plan, and for reducing costs, in part through asset pooling."

Still, the report added, "These advantages are not always unique to MEPs." Also, there's not a lot of data on how well MEPs work. Given the lack of data, Jeszeck said, "Frankly, they may have some merit, but it's unclear how effective" they are in reducing the burden on small businesses.

Fees are a problem

While MEPs may offer benefits to small employers, the structure also poses risks to workers in the form of hidden costs, the GAO report said (although that problem isn't unique to MEPs). "If you're in a 401k plan, it's really your responsibility, as much as possible, to be knowledgeable about fees," he said. "There are a lot of different types of fees…It can be a challenge."

Even employers "very often have no clue as to what the fees are," Jeszeck said. "You don't even see them."

The GAO report cited one somewhat chilling example -- the case of a workplace plan with 65 participants and about $5.8 million in plan assets. The employer told the GAO that the company paid nothing for record-keeping and administrative fees. But according to the report, "The fee report the sponsor provided indicated that these fees in total were about $10,700 -- about $5,900 was invoiced to the company and roughly $4,800 was paid to the provider from revenue sharing fees collected from participants' asset accounts."

The GAO has also found that workers in plans with fewer than 50 participants paid 0.43% of plan assets annually in fees, on average -- considerably more than people in plans with more than 500 participants, who paid 0.22% for record-keeping and administrative services (not counting other fees).

Plus, at about 69% of small-firm plans, participants paid all of the investment fees, which were as high as 3.2% of assets, the GAO report said.

Worrisome, indeed.

To top it off, many workers are finding that it's getting harder to save, even if you do have access to a workplace plan.

"If you look at the income distribution, it's gotten more skewed. The median wage hasn't been going up," Jeszeck said. "It's getting harder and harder for middle-class workers to save for anything, let alone save for retirement."

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