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Small Business Sees Boom in Retirement Plans
New study finds big jump in savings options for workers at companies with fewer than 100 employees
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Key takeaways
- The share of small businesses with an active 401(k) plan rose from 19 percent in 2019 to 31 percent in 2026, according to a new report from payroll services provider Gusto.
- Nearly half of small-business workers age 50-plus have access to a workplace plan, up from a third seven years ago.
- Experts say state “auto-IRA” programs, an initiative long championed by AARP, are a major factor driving the change at smaller companies.
The share of small businesses providing a retirement savings plan for their workers has risen from fewer than 1 in 5 in 2019 to nearly 1 in 3 this year, with hourly workers seeing big gains in access, according to new research.
The study from Gusto, which provides businesses with payroll and benefits services, found that 31 percent of companies with two to 99 employees had active 401(k) plans as of June 2026, up from 19 percent seven years ago.
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That increase could have a significant impact on older adults, who make up a bigger share of the workforce at small companies than at large ones. Forty-six percent of small-business employees age 50-plus now have access to a workplace retirement plan, compared with 34 percent in 2019, according to additional data Gusto provided to AARP.
“Small-business owners are recognizing that offering a 401(k) is good for their employees and good for their businesses,” says Nich Tremper, a senior economist at Gusto and the author of the report.
Another factor, according to the Gusto study and research by AARP and other organizations, is the spread of state "auto IRA" programs that require small businesses without a retirement plan to enroll workers in a state-facilitated individual retirement account. AARP has championed the auto-IRA model, which has been launched in 15 states to date, with two more programs slated to start in the coming months.
Sita Nataraj Slavov, a professor of public policy at George Mason University’s Schar School of Policy and Government who specializes in Social Security and retirement policy, has examined the effects of state auto-IRA policies on small employers.
“My research shows that many small firms have opted to comply with state auto-IRA policies by starting their own plans instead of using the state auto-IRA program,” Slavov says. “It does seem like these policies can account for at least some of the increase.”
Small businesses have lagged behind
Small companies, which employ about one-third of U.S. workers, remain much less likely than larger companies to provide retirement benefits. More than 90 percent of companies with 100 or more workers offer such a plan, according to an August 2026 report from the Center for Retirement Research at Boston College (CRR).
Previous research by the center found that concerns about costs and paperwork are common deterrents for small-business owners but that many overestimate both the financial and administrative burden of offering a retirement plan.
In a 2023 CRR study, more than half of small companies surveyed thought offering a 401(k) would cost them more than $10,000, and a third believed costs topped $20,000, although many plans on the market cost considerably less.
Tax breaks can help make plans more affordable for employers. For example, under SECURE 2.0, a 2022 federal law that included dozens of provisions designed to encourage and ease retirement saving, eligible small businesses can claim a federal tax credit of up to $5,000 a year for three years to help cover the cost of starting certain retirement plans. Some companies can also claim credits for matching 401(k) contributions made by qualifying workers.
“Both federal policies around tax credits and state mandates are driving part of this trend,” Tremper says. He notes that Gusto found much faster growth in plan adoption among very small employers in states with auto-IRA programs (although there was an increase in non-auto-IRA states as well).
But the recent federal and state actions “are not the full story,” Tremper adds, with small businesses growing more aware of the upside of offering retirement plans.
“Gusto research has found that businesses that offer 401(k)s have about 8 percent less attrition during an employee’s first year than similar businesses without a 401(k),” he says. “Small-business owners are recognizing that offering a 401(k) is good for their employees and good for their businesses.”
David C. John, a senior policy adviser at the AARP Public Policy Institute specializing in retirement savings, says the gains in plan access are “excellent news” but notes that large gaps in coverage remain.
“There are still thousands of workers who don’t have the ability to build retirement security at work,” John says. “Employers who had considered starting a plan but never got around to it, or who think a 401(k) will help them to attract and keep better workers, have to act.”
Hourly workers see the biggest gains
The smallest companies — those with fewer than 10 employees — account for much of the growth in retirement plan provision, according to Gusto, and gains in access and participation were greatest among hourly workers, who make up nearly two-thirds of the small-business workforce.
Thirty-eight percent of hourly small-business workers now have access to a 401(k), up from 21 percent in 2019, more than three times the rate of growth for salaried employees, the study found. Participation remains far higher among salaried workers, 70 percent of whom contribute if their workplace offers a plan, compared with 45 percent for hourly workers.
Older workers are more likely to work for small businesses and to work part-time, making expanded access especially relevant to them — provided they participate, says Angela M. Antonelli, executive director of Georgetown University’s Center for Retirement Initiatives.
“Access is the on-ramp, not the destination. The real measure of success is whether people stay enrolled, keep contributing and don’t cash out when they change jobs or for other reasons,” she says. “Staying the course and saving is what will actually build retirement security.”
Compared with IRAs, workplace plans like 401(k)s offer more opportunity for older workers to catch up on years when they didn’t save because they often include employer matches and have much higher contribution limits, especially for savers 50 and older.
“While it is never too late to save, it can be later than you’d like, which is exactly why expanding access matters so much,” Antonelli says. “Although you cannot get back the years you did not have a retirement plan, you can absolutely still change your financial future, even if it means you are only saving for 10 or 15 years.”
The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
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