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Popular wisdom has it that small businesses would gladly offer retirement plans -- if not for the red tape and expense. Turns out, those aren't entrepreneurs' top reasons for eschewing pensions, a newly released survey by the Employee Benefit Research Institute shows. Many entrepreneurs without plans know little about the options. And -- surprisingly, in this tight labor market -- they don't see a pension plan as an important recruitment and retention tool, in distinct contrast to those who do offer plans. The Washington (D.C.) think tank polled 300 small employers that offer plans and 300 that don't. All had 5 to 100 full-time employees.

According to EBRI, 21 cited employees' preference for cash or other benefits as the most important reason, 18% cited a transient or part-time work force, and 13% blamed uncertain revenues. Only 9% claimed administrative costs as their top objection, and 3%, red tape.

NOT SO SIMPLE?
Another factor: Ignorance. A surprisingly large percentage of small employers without plans say they've never heard of those that Congress authorized specially for them: the SIMPLE and Simplified Employee Pension plans. One-third profess complete ignorance of the SIMPLE, and over half say they've never heard of the SEP plans.

Those who have plans are evidently converts. Thirty-five percent say recruiting and retention are their top reasons for offering the benefit. An additional 21% cite the salutary affect on workers' attitudes and performance, while 13% are most motivated by a sense of duty. Tax breaks for the company rated tops with a mere 5% of those polled.

How much do small companies lag behind big ones in offering retirement benefits? Only 20% of small companies do so, according to a recently completed study of 2,600 small employers by Spectrem Group, a San Francisco benefits-consulting firm. (A 1997 Bureau of Labor Statistics survey showed that nearly 80% of companies with more than 100 workers offered such plans.)

It's hard to pick up trends in a study that's only a few years old, says Paul Yakoboski, the EBRI senior research fellow who headed the survey. Still, there are signs in the data that the competitive labor market is pushing small employers to offer such benefits. The percentage that cite the recruitment and retention advantage as their No. 1 reason has climbed steadily in the three years of the survey, from 24% in 1998, 33% in 1999, and 35% this year. Ditto, the figures for those that said the labor market was a major -- if not top -- motivation: 56% in 1998, 60% in 1999, and 65% in 2000. And the percentage without plans that insist employees prefer wages and other benefits has fallen sharply since last year, to 38% from 53% in 1998.

EDUCATION.
One thing that's clear is that it's not enough to create simpler plans and assume small employers will embrace them. The data, says Yakoboski "point to the need to educate employees and employers." Employers without plans, he adds, may be more receptive to peers' assessment of the advantages of offering some kind of retirement benefit than they would be to policy wonks or government officials. What about those who insist their employees would rather have the cash? They may simply be out of touch: "What I think my employees want may not be right," Yakoboski points out.

One area the EBRI study doesn't illuminate is what types of companies lack plans. Some of the characteristics of no-plan companies sound like Old Economy operations such as car washes and low-tech factories -- companies with lower revenues and younger, transient workforces. But, in the modern world, that also fits the description of many dot-com or other high-tech shops. The most progressive sector of the economy may be falling behind in this area.