For a long time, access to a retirement plan was something employees got by working at a larger company. If someone wanted a 401(k), they probably needed a company large enough to have an HR department and its own benefits administrator. Many small businesses assumed prices were too high, with too much admin overhead, so many didn’t bother to offer one. That assumption held for decades. However, that has changed greatly over the last decade thanks to a combination of technological advancements and new government policies.
At Gusto, we provide retirement access to small business owners and their employees. Recently, we looked at retirement plan adoption among businesses with two to 99 employees, and what we found was incredibly inspiring. From 2019 to 2026, active plan adoption rose from 19% to 31%, an increase of about 64%. And the businesses driving the majority of that growth are the smallest employers. Businesses under five employees doubled their adoption rate, from 10% to 20%. Businesses with five to nine employees grew 64%, from 22% to 36%.
Equally exciting are the industries powering some of this growth: hospitality, recreation, and agriculture. Many employees working in these fields are hourly workers, who have historically been the last group to get access to workplace benefits. But we saw their access to a retirement plan rise 79% since 2019. What this tells me is that there is a clear structural shift happening in what it means to work for a small business.
THE SHIFT
So what caused this shift?
The first is policy combined with labor market pressure. State auto-IRA mandates have made a huge impact. Our research found that among businesses with two to five employees, adoption grew 121% in states with an auto-IRA mandate, compared with 54% in states without one. Among businesses with five to nine employees, it was 83% versus 37%. Additionally, SECURE 2.0’s expanded tax credits lowered the cost of starting a plan, and the tight labor market of 2021 and 2022 pushed small employers to compete on benefits in addition to wages.
The second force that caused the shift is technology. Payroll-embedded benefits have made it operationally possible for a five-person business to offer something that used to require a dedicated HR function. A small business should not need to build a benefits department to give its employees a retirement plan, and increasingly, it doesn’t have to.
That said, there’s still real ground left to cover. Hourly workers continue to be the majority of the small-business workforce and still a minority of its retirement savers. Small businesses make up 99% of all companies in the U.S. and employ 46% of the workforce, so closing that gap matters at a national scale.
THE APPROACH
So how do we do it?
First, there is a knowledge deficit around SECURE 2.0 and the startup tax credit it provides. These tax credits can cover up to 100% of a small business’s plan costs. However, a recent study from the Georgetown University Center for Retirement Initiatives found that only 5.5% of eligible small businesses have claimed them, as of 2023. Most owners don’t know the credits exist or how large they are. Getting that information in front of small-business owners, whether through tax preparers, payroll providers, or state and federal agencies, is a low-cost fix that deserves more attention.
Second, pass the RISE Act. Right now, a business needs tax liability to qualify for SECURE 2.0’s startup credit, which leaves out the businesses that need the help most. The RISE Act, which is currently pending in Congress, would let companies like ours claim the credit directly on a small business’s behalf. This would unlock the credit for owners with no tax liability and let the value show up immediately, as lower plan fees, instead of waiting on a tax filing.
Third, we should be extending auto-IRA consistency across states. State mandates have proven to be one of the most powerful drivers of small-business retirement plan adoption. Federal action, whether more support for state programs or a national minimum coverage standard, would extend those gains to workers in every state, not just those that acted first.
Fourth, we can build on the Saver’s Match . Starting in 2027, SECURE 2.0 replaces the nonrefundable Saver’s Credit with a Saver’s Match. This is a direct matching contribution of up to $1,000 deposited into a lower-income worker’s retirement account, paid even if that worker owes no tax. This is a real, near-term tool aimed at the deferral-rate problem this data points to, and it’s worth building momentum around now.
FINAL THOUGHTS
A decade ago, having a retirement plan at a small business was less common. Today, nearly a third of small businesses have an active plan. For owners, it has turned into something that is affordable and easy to manage for their employees. Small businesses employ more than 45% of the workforce, so when retirement savings becomes standard, it resets what a small-business job can offer. It also helps small businesses compete for the same workers against much larger employers.
Tomer London is chief product officer of Gusto.
