5.6 million more small business workers have available retirement plans than in 2019

Key Findings

• Increased retirement plan use at small businesses has increased retirement savings access for 5.6 million workers. The share of small businesses with an active retirement plan rose from fewer than one in five to nearly one in three between 2019 and 2025.

• Businesses with fewer than 10 employees saw 80% growth in retirement adoption. Businesses with fewer than 10 employees saw the largest gains in active plan adoption, increasing access for workers at firms that have historically been least likely to offer retirement benefits.

• Black and Hispanic small business employee participation in retirement plans have increased by 52% and 71%, respectively, since 2019. More than half of workers with access to an active plan now participate, with especially strong gains among hourly, lower-income, Black, and Hispanic workers. At the same time, more than half of small business employees do not have access to a retirement plan. This presents an opportunity to increase long-term financial security for many workers. 

• Small business employees typically save 4-5% of their income in their retirement plans.. Despite gains in access and participation, deferral rates at small businesses have remained largely unchanged since 2019. Combined with the surge in inflation in 2021 and 2022, this has led to a decline in real retirement savings, particularly among the lowest earners.

Introduction

Small businesses employ more than 40 million people in the United States, yet their workers have historically been far less likely than those at larger firms to have access to retirement plans. In recent years, that picture has begun to change as more small employers adopt retirement plans that employees actually use. Using administrative payroll data, this report documents how access to active retirement plans has evolved since 2019, particularly at the smallest firms. We focus on realized access, participation, and savings outcomes rather than whether benefits are offered in principle.

Small businesses are 58% more likely to have active retirement plans than in 2019

Since 2019, the share of small businesses with active retirement plans has increased from fewer than one in five to nearly one in three, a 58% increase in the likelihood that a small business offers a retirement plan its employees actually use. We define an “active” retirement plan as one where at least one employee is saving through a payroll deduction or receiving an employer contribution, rather than a plan that exists only on paper. For very small businesses, even a single participating employee represents a meaningful share of the workforce and signals that the plan is available and used. Our sample includes small businesses with 2–99 employees from 2019 to 2025.

There is no widely cited benchmark for how many small businesses have retirement plans that employees actually use. Public estimates typically rely on establishment surveys, which report whether a plan is offered, not whether employees participate. By contrast, our measure captures observed savings behavior, allowing us to distinguish between plans that exist in name and those employees actively use. As a result, our estimates are lower than survey-based figures, but more directly tied to true access because it shows businesses with plans that employees actually opt into. This is the measure we use throughout this report.

Using administrative payroll data also allows us to observe very small firms, businesses with fewer than 10 employees, that make up a large share of the U.S. labor market but are often underrepresented in survey data. This report provides a large-scale view of retirement plan use among small businesses, focusing on plans that employees actually use rather than benefits employers report offering.

The share of businesses with fewer than 5 employees and retirement plans has nearly doubled since 2019

Retirement benefits have become more common across all small business sizes since 2019, but the largest gains have occurred at the very smallest firms. The share of businesses with fewer than five employees with a plan nearly doubled, from 10% in 2019 to 18% in 2025. Businesses with 5 to 9 employees saw their share rise 59%, from 22% to 35% over the same period.

Two forces likely contributed to this shift: regulatory changes in many states and employers responding to a tight labor market. Since 2017, many states have passed Auto-IRA laws requiring certain employers to either offer a qualified retirement plan or enroll employees in a state-run IRA. We observe larger increases in active plans in these states, though adoption also rose in states without such policies. Among businesses with 2–5 employees, active plan adoption increased 92% in Auto-IRA states, compared to 48% elsewhere. For businesses with 5–9 employees, the corresponding increases were 77% and 35%.

Policy alone does not explain the trend. The post-pandemic labor market likely reinforced these changes as small employers competed more aggressively for workers in 2021 and 2022. Taken together, these patterns suggest that the rise in active retirement plans, especially among the smallest employers, reflects multiple forces working in the same direction rather than a single policy or market change.

All industries have seen an increase in businesses with retirement plans

Every industry in our data saw an increase in the share of businesses with retirement plans. White-collar sectors like Professional Services, Finance, and Information now have shares approaching 50%, but the largest gains were in industries where active plans were rare six years ago: Hospitality (+188%), Recreation (+132%), and Agriculture (+86%). While adoption rates in these industries remain lower than in traditional white-collar sectors, the pace of growth reflects a meaningful shift in where retirement plans are taking hold. These sectors have seen steady, year-over-year expansion since 2019, suggesting that employer-sponsored retirement savings are becoming more common in parts of the economy where workers have historically been less likely to have access.

Retirement plan expansion increased access to retirement savings to 5.6 million small business employees 

As more small businesses offer active retirement plans, more workers have access to them. The share of small business employees working at a company with a retirement plan rose 42% since 2019, from 31% to 43%. 

These gains were driven in large part by very small firms: at businesses with fewer than five employees, access rose from 12% to 19%, and at businesses with 5 to 9 employees, access increased from 22% to 34%.

In concrete terms, more than 40 million people work for businesses with fewer than 100 employees. Compared to 2019, 5.6 million more of these workers now have access to an active retirement plan. If access rates had remained at their 2019 levels and only employment had grown, we would have expected access to increase by about 1.6 million workers. Instead, small businesses adopting active plans expanded access by more than three times that amount, reflecting changes in employer behavior rather than workforce growth alone.

As the figure above shows, access among Black small business employees increased by 52%, and access among Hispanic employees increased by 71% since 2019. Retirement benefits are a key piece of overall wealth building, meaning that increased access and savings rates could address long-documented wealth differences between White and minority populations. 

When retirement plans are available, more than half participate

Access alone doesn’t guarantee savings. But among small business workers with access to an active plan, more than half participate, with notable gains among groups that have historically saved at lower rates.

Participation among hourly workers rose 23% between 2019 and 2025, from 34% to 42%. Among workers earning less than $2,500 per month, participation increased 29%, from 23% to 30%. Black and Hispanic workers also saw gains, rising from 46% to 49% and 43% to 49%, respectively. Meanwhile, participation among salaried workers dipped slightly (72% to 70%), and Asian/Pacific Islander workers saw the only notable decline (63% to 61%).

At the same time, these participation rates underscore an important limitation: a substantial share of small business employees still do not save for retirement even when a plan is available. This gap between access and participation may help explain why increases in retirement plan adoption have not yet translated into uniformly higher savings outcomes.

Employers play a role here too. About 70% of small businesses with an active plan contribute to their employees’ accounts, a share that has held steady since 2019. Among those that contribute, the typical match is around 3% of gross pay. That 3% figure is notable: in a dataset where most metrics vary widely by business size and worker income, average and median employer contributions are nearly identical. This suggests many small businesses are calibrating their match to meet safe harbor requirements, which protect employers from additional compliance testing on their 401(k) plans.

Despite increased participation rates, typical savings rates remain low for small business employees

Access to retirement plans has increased, and participation has risen. But how much are small business employees actually saving? Payroll data suggests that small business employees have stagnated their savings over the last six years.

Deferral rates, or the amount that employees are saving from their income for retirement, at small businesses have remained largely unchanged since 2019. Among workers who save, the typical employee at a business with fewer than five employees defers about 5% of gross pay, while the typical worker at a business with 20 to 49 employees saves about 3.6%. These rates have not increased meaningfully over the past six years, despite expanded access to retirement plans and higher participation.

Small business employees also save less than their counterparts at larger firms. Vanguard estimates that the median deferral rate at large employers was 6.8% in 2024, up 13% from 2019. By contrast, deferral rates at small businesses have remained flat. Over time, this gap compounds: even modest differences in savings rates can translate into substantially lower retirement balances over a full career.

Flat deferral rates help explain why improvements in access and participation have not yet translated into stronger retirement outcomes. Without increases in how much workers save, gains in plan adoption alone are unlikely to meaningfully improve retirement preparedness for most small business employees.

Real (inflation-adjusted) savings has declined for the typical small business employee since 2019

Flat deferral rates would be concerning on their own. Combined with the surge in inflation in 2021 and 2022, they have had a more serious consequence: in real terms, the typical small business employee is saving less for retirement today than they were six years ago.

After adjusting for inflation, the typical small business worker saved at least 15% less in 2025 than in 2019. For the lowest earners, the decline was even larger—more than 25%. These losses reflect the erosion of purchasing power during a period when prices rose rapidly but savings behavior did not change.

This pattern suggests that many workers who had access to retirement plans and were already participating chose not to increase how much they saved, likely prioritizing take-home pay as the cost of living rose. When deferral rates remain flat during periods of high inflation, each dollar saved buys less retirement security than before.

Conclusion

Access to active retirement plans at small businesses has expanded substantially since 2019, bringing millions more workers into plans their employers and employees actually use. However, higher access and participation have not translated into stronger savings outcomes, as deferral rates have remained flat and real retirement savings declined during the surge in inflation in 2021 and 2022. These patterns reveal a widening gap between improved coverage and deteriorating financial outcomes for small business workers. Closing that gap will depend on whether expanded access can ultimately translate into higher levels of saving.

Methodology

This report uses anonymized administrative payroll data to examine how access to and use of retirement plans at small businesses has changed since 2019. The analysis focuses on private-sector businesses with 2 to 99 employees observed between 2019 and 2025. Businesses enter and exit the sample as they appear in the payroll data, reflecting real-world firm dynamics.

Defining active retirement plans

We define an active retirement plan as one in which at least one employee makes a payroll contribution to a retirement account or receives an employer contribution during the year. This definition distinguishes plans that employees actually use from plans that exist on paper but see no participation. For very small firms, even a single participating employee represents a meaningful share of the workforce and signals that the plan is available and functional.

Measuring access, participation, and savings

• Access is measured at the worker level as employment at a firm with an active retirement plan in a given year.

• Participation is measured among workers with access, defined as making at least one retirement contribution during the year.

• Deferral rates reflect the share of gross pay that participating employees contribute to their retirement accounts.

All statistics are calculated directly from observed payroll and contribution records.

Firm size, industry, and worker characteristics

Businesses are grouped by employee count to examine differences across very small firms. Industry classifications are based on employer-reported industry codes and aggregated to broad sectors. Worker-level analyses include breakdowns by pay type (hourly vs. salaried), earnings levels, and race and ethnicity, as available in the payroll records or derived from existing administrative classifications used consistently throughout the dataset.

Race and ethnicity are not directly observed in the payroll data. Where race and ethnicity results are reported, we use Bayesian Improved Surname Geocoding (BISG) to probabilistically impute race and ethnicity based on employee surnames and geographic information. This approach combines Census surname distributions with local demographic characteristics and has been widely used in academic research when self-reported race is unavailable. We implement this method using the surgeo software package.

Inflation adjustment

Where noted, savings outcomes are adjusted for inflation using standard price indexes to compare real (inflation-adjusted) values across years using the average CPI-U for that year as reported by the St. Louis Federal Reserve’s FRED database. Inflation adjustments are applied consistently across worker groups to assess changes in purchasing power over time.