More Small Businesses Offer Employees Retirement Plans than Ever Before

Key Takeaways

• Small business retirement coverage rose to 30% in 2025.
• 21.1 million employees now have employer-sponsored plans.
• State-mandated Roth IRA programs drive adoption.
• Plans boost recruitment and employee retention for SMBs.
• Legislation exists in 21 states, including NY and CA.

Summary

In 2025, 30% of U.S. small businesses (2‑99 employees) offered retirement plans, up from 19% in 2019, giving 21.1 million workers access to employer‑sponsored savings. The surge reflects state‑mandated Roth IRA programs and a strategic shift toward benefits that attract and retain talent. Gusto’s report highlights that legislation in 21 states, notably New York’s auto‑enrollment rule, has accelerated adoption. Small firms now view retirement options as a competitive HR tool rather than a perk reserved for large corporations.

Pulse Analysis

The rapid climb from 19% to 30% of small firms offering retirement benefits signals a fundamental change in how SMBs approach employee compensation. With 21.1 million workers now covered, the market is moving beyond the traditional view that retirement plans are exclusive to large corporations. This expansion aligns with broader demographic shifts, as a growing segment of the workforce seeks long‑term financial security, prompting employers to adapt their benefit portfolios accordingly.

State policy has been a catalyst for this momentum. Over the past few years, 21 states enacted legislation requiring private employers—often those with as few as ten employees—to auto‑enroll staff in Roth IRAs or similar retirement vehicles. New York’s pioneering law, which mandates auto‑enrollment for firms with more than ten workers, set a precedent that other states like California, Maine, and Virginia quickly followed. These regulations lower administrative barriers and create a default savings pathway, making it easier for small businesses to comply while delivering tangible value to employees.

From a strategic standpoint, offering retirement plans now serves as a powerful recruitment and retention lever. In a tight labor market, SMBs leverage these benefits to compete with larger enterprises that traditionally dominate the perks arena. As the workforce increasingly prioritizes financial wellness, firms that integrate robust retirement options can expect higher employee loyalty, reduced turnover costs, and an enhanced employer brand. Looking ahead, continued legislative activity and heightened employee expectations will likely push the adoption rate even higher, making retirement benefits a standard component of small‑business compensation packages.