Fidelity^® Survey Finds More Than Half Of Nation's Six Million Small Businesses May Not Have Optimal Retirement Plans

New Guidance Helps Small Business Owners Select a Retirement Plan; Calculator Determines Appropriate Contribution Rates

BOSTON – A survey¹ of small business owners from Fidelity Investments^® finds that more than half (53 percent) of the nation’s nearly six million small businesses² may not have the retirement plan that best fits their needs. In addition, many small business owners are struggling to understand the features and benefits of their current retirement plans. Fidelity, a leader in helping Americans save for retirement, has published a Viewpoints article and introduced a calculator that can help small business owners determine an optimal plan and contribution rate.

The survey of more than 500 small business owners gauges the respondents’ understanding of SEP-IRAs, SIMPLE-IRAs and Self-Employed 401(k) plans. The results highlight the education gap that many small business owners face with their current plans. In fact, when asked a series of basic questions about their retirement plan features and benefits, respondents on average answered just 66 percent correctly. For example:

• Half who use a Self-Employed 401(k) did not know the maximum annual employer contribution allowed for this plan;
• Nearly two-thirds (60 percent) with SIMPLE-IRAs were not aware that employer tax filing is not required;
• More than half (55 percent) using a SEP-IRA did not know that the plan is funded solely by employer contributions.

“With the April tax filing deadline just around the corner, now is an ideal time for small business owners to reassess their retirement plans and determine if they meet their needs,” said Ken Hevert, vice president, Fidelity Investments. “To ensure small business owners are in the best plan, Fidelity works closely with them to evaluate their specific retirement savings goals through one-on-one guidance with our investment professionals and educational content online.”

In addition to uncovering a knowledge gap among respondents who currently have a retirement plan, 100 small business owners who do not have a retirement savings plan were surveyed. The top reason (34 percent) cited for not having a retirement plan is the perception that it is too expensive.

New Guidance Offered to Help Small Business Owners Evaluate Plan Options
To help small business owners, especially those with 10 or fewer employees, Fidelity has published a Viewpoints article that outlines the costs, contribution limits and other critical features and benefits of four types of retirement plans that small business owners should consider:

• Simplified Employee Pension Plan (SEP-IRA)

• Savings Incentive Match Plan For Employees (SIMPLE-IRA)

• Self-Employed 401(k) Plan

• 401(k) Plan

The article focuses on the first three, which are generally the most suitable for very small businesses, and outlines the characteristics of each plan. Each of these plans offers tax advantages, including pre-tax contributions, tax-deferred growth potential and the potential to deduct employer contributions as a business expense. Beyond these common tax advantages, there are distinct differences with each plan, such as who is responsible for funding the account.

“Our study found that three-quarters of small business owners believe a retirement plan will help them retain employees, so it’s important they select the plan that is not only best for them, but also for their employees, “said Hevert. “To this end, it’s critical to factor in the number of employees who will be participating in a potential plan, as well as the funding responsibilities of the employer, contribution limits and plan administration details.”

Additionally, to help small business owners decide what percentage they should consider contributing to a SEP-IRA or Self-Employed 401(k) Plan, Fidelity has introduced a Self Employed Plan Contribution Calculator. After answering five simple questions, small business owners can adjust their contribution percentages to model various scenarios and compare plans. While plan set-up and funding deadlines vary for each plan, the launch of the calculator is especially timely for small business owners currently using or considering a SEP-IRA, which is the only plan that can still be established and funded for tax year 2011 – up until the April 17, 2012 deadline.

These resources complement the educational information already found at the firm’s online Small Business Center at www.fidelity.com/smallbusiness. For additional guidance, small business owners also can work at no charge with investment professionals who specialize in small business retirement plans on the phone at 800-544-5373 or in-person at any of Fidelity’s 167 investor centers across the United States.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.4 trillion, including managed assets of $1.5 trillion, as of Dec. 31, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

Although consultations are one on one, guidance provided by Fidelity is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.

Fidelity Brokerage Services LLC, Member NYSE, SIPC 900 Salem Street, Smithfield, RI 02917

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1) Results of Fidelity’s Small Business Owner Retirement Plan study are based on an online survey conducted among 638 owners of a business with fewer than 100 employees. Interviewing for this survey was completed during the period December 8-13, 2011 by ORC International, not affiliated with Fidelity Investments. The results of this survey may not be representative of all small business owners meeting the same criteria as those surveyed for this study.

2) Small Business Administration 2008 data – 5.8 million businesses with fewer than 100 employees, employing 42 million people.