Despite regulatory efforts to encourage retirement plans within small businesses, a new survey by ShareBuilder 401(k) finds that only a modest percentage of small organizations are offering 401(k) accounts.
The survey, which fielded responses from 500 U.S. small business owners at companies with one to 50 employees, found that just 24% of smaller employers provide 401(k) benefits to employees.
When asked why they haven’t added retirement features, over half (55%) responded that their business is “too small to access a plan,” while 28% said they could not afford a company match. Another 22% said providing a 401(k) is too expensive.
Sharebuilder’s findings also exposed the impacts that workers face when their employers don’t offer retirement benefits. Nearly a quarter (23%) of employees are saving less than 1% of their income for retirement, 17% are saving between 1% to 9%, and 25% are not contributing to their retirement at all. Close to half (49%) are uncertain if they’ll ever be able to retire by any means.
A lack of affordability is a known hurdle among small businesses wanting to incorporate retirement planning benefits. Another report from Fidelity in 2023 highlighted the retirement coverage gap within small plans, finding that just 34% of small employers currently offer retirement benefits to employees. Of those who don’t, 48% say they cannot afford to provide such features.
While SECURE 2.0 legislation aims to reduce this coverage gap by offering incentives to small businesses who offer retirement plans, Sharebuilder’s report finds that some plan sponsors are still unaware of the regulation or its benefits. According to the survey, only 18% of small business owners are aware of tax credits offered through SECURE 2.0.
“Nearly half of all Americans work for small businesses, and 401(k)s have proven effective in helping employees build meaningful nest eggs for retirement,” said Stuart Robertson, CEO of ShareBuilder 401k. “The need to debunk these misconceptions about the access and affordability of 401(k) plans for small businesses is essential to help a large swath of Americans to have the option to retire with financial security. As a country and industry, we must spread awareness about the Secure Act 2.0 tax credits and the tailored solutions available to any size business, including the self-employed, to help ensure a more secure financial future for all and avoid a retirement crisis many indicate lies ahead.”
SEE ALSO:
- Small Businesses Report High Economic Optimism
- 2 in 3 Small Businesses Still Don’t Offer Retirement Plans: Fidelity
- Just 1 in 4 Small Businesses Currently Offer a 401k
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
