Retirement is a long way off for 28-year-old Wallace Miles. So, the lack of a pension plan at the small Los Angeles market where he works does not bother him--yet.
"I don't think too much about (a pension) at the moment," said Miles, who manages Papa's Grocery in the Crenshaw district. "Maybe down the road, I will have to have it . . . because it's going to help in the long run."
Tony Verone, 25, plans to open an individual retirement account with the knowledge that his employer, a Seal Beach locksmith, will not be offering him a pension.
"That's not how small business works," said Verone, who manages Seal Beach Lock & Safe. "You have to take care of yourself."
Miles and Verone are two of the nation's estimated 42 million American workers without a company pension. Small firms, such as Seal Beach Lock & Safe and Papa's Grocery, are prime targets of recent government proposals to increase pension coverage. However, the plans have met with a lukewarm response from business groups and criticism by others who claim that the plans do little for low-income workers who face retirement without a major source of income.
The Labor Department initiatives--which would, among other things, create a simplified, low-cost retirement plan for small firms--are the latest developments in a long and messy struggle over pension reform. Business favors tax-sheltered plans with a minimum of regulation and employee contributions; worker and retiree groups prefer pensions funded only by employers, and the government looks askance at any proposal that would cut tax revenue.
Meanwhile, recent business trends have magnified fears that more workers "will be hitting 60 and 65 and not have enough to live on," said Judy Husbeck, a senior analyst at the American Assn. of Retired Persons. "My sense is that a lot of these folks are in for a rude shock."
The government's most recent proposals focused primarily on small businesses, which create most of the nation's jobs but are the least likely to offer pensions. An estimated 26 million workers at small businesses lack pensions.
Pensions have been a standard benefit at large corporations and at unionized firms since World War II. About 51 million workers are covered by company-sponsored plans, according to the Assn. of Private Pension and Welfare Plans, an industry trade group.
But less than 20% of firms with fewer than 25 workers offered pensions, according to a 1988 survey conducted by the Employee Benefit Research Institute. By comparison, 83% of companies with 250 or more employees offer the benefit, the EBRI study showed.
"A lot of people don't realize that only half the work force at any given time is accruing pension benefits," said Joe Piacentini, an analyst at EBRI.
"Typically, a small business doesn't turn to pension funds until the owner is making a good living and realizes the need to shelter some income from taxes," said Rachel Owens, a sales agent for Massachusetts Mutual Life Insurance Co. in Santa Ana.
Besides contributing to a pension account, a business owner with 25 employees faces a $5,000 bill just to set up the plan and at least $4,000 a year in administrative costs, said Louis Kravitz, a pension plan administrator in Encino.
Costs such as those put pension plans out of reach for most small businesses.
"Basically, I've never had the money," said Thomas Vessels, owner of Seal Beach Lock & Safe and Los Alamitos Lock Service. "I don't know many small-business owners who do."
He said health insurance for his eight employees, which comes to about $1,000 a month, "takes its toll as it is."
Complex rules and constant changes in pension regulations add to the frustration.
"It's a constant aggravation," said William Pechstedt, president of Huntington Park-based Sanford Lussier, which employs 27 workers in the manufacture of hardwood moldings.
"We just put this plan in a couple of years ago," Pechstedt said of a profit-sharing pension plan for seven salaried workers. "We got through paying for that. Now, my pension administrator says we have to write a new plan (because of revised regulations). Now, we have to do this all over again."
Many of the costly and complicated administrative requirements would be eliminated under one of the Labor Department's pension proposals aimed at firms with 100 or fewer workers. In return for less red tape, an employer would have to contribute to the plan at least 2% of a worker's pay, up to a maximum of $2,000 a year. The employee would be able to contribute up to $4,200 on a pretax basis. The employer would have the option to match up to 50% of the employee's contribution.
Cutting the paperwork costs will persuade many small businesses to begin pensions, said D. J. Gribben, legislative representative for the National Federation of Independent Business, a group of small-business owners.
However, the mandatory 2% contribution "will require a lot of money," Gribben said. "That will probably price the plan out of the price range of most small employers."