How personalized tax estimates turned awareness into $31 million in savings for small businesses

By: Steve Abbott, Stephanie Liu Cossart, and Nich Tremper

Introduction

An affordable, dignified, and secure retirement is part of the dream of many U.S. workers. However, more than half of U.S. workers worry that they will run out of money in retirement, and nearly 56 million private sector workers lack access to an employer-sponsored savings plan. To expand access, Congress created the Small Employer Pension Program, which is a federal tax credit that helps small businesses start and maintain retirement plans. The credit was strengthened under SECURE 2.0, passed in December 2022.

The program reimburses up to 100% of qualified start-up costs, up to $5,000 per year for three years, for employers with fewer than 100 workers, with the most generous support for those with 50 or fewer employees. In addition to covering start-up costs, it also provides a $500 annual credit for adding automatic enrollment and a credit on employer contributions of up to $1,000 per employee, phased down over five years. In other words, eligible businesses can receive tax credits not only for the cost of setting up a plan, but also for helping employees save more for retirement. Employers must be offering a retirement plan for the first time.

Yet takeup of this tax credit remains low. In a sample of more than 15,000 small businesses that met the eligibility criteria, only 2.6% had completed the paperwork to claim the credit by early April 2025. After Gusto alerted these employers about the program, provided them with an estimated tax savings (the average saving was $5,000) and made the IRS draft form easy to generate, take-up climbed to 39% by October 2025. This analysis shows how providing small businesses with tax savings estimates through an existing program can immediately unlock funds small businesses already qualify for, and help more workers begin saving for retirement.

Notifying small businesses of estimated savings drives adoption, and $31 million in savings

By October 2025, 39% of eligible small businesses had taken the steps needed to claim the Small Employer Pension Program tax credit on their 2025 returns. These were employers already offering retirement benefits but who hadn’t yet completed the IRS paperwork required to access the credit.

Gusto doesn’t file taxes on behalf of customers, but it can auto-generate the necessary IRS draft form for employers who opt in. Adoption unfolded in two phases: an email campaign in spring 2025 that raised early awareness, followed by an in-app notification in the summer, which made eligibility, estimated tax savings, and next steps clear. The second touchpoint produced a sharp rise in participation.

Since the start of 2025, these actions have unlocked more than $31 million in tax credits for small businesses. This money was previously left unclaimed simply because employers didn’t know the credit existed. Take-up rates were consistent across business sizes, regions, and local economic conditions (roughly 37–42%), underscoring a powerful point: when small businesses learn about a valuable program and the process is simple, they act.

Small health care providers lead the way in using this tax credit

Take-up rates were consistent across most types of small businesses, but two industries stood out: health care and social assistance (above average) and information services (below average). Each differed by roughly eight percentage points from the overall 39 percent adoption rate.

One reason may be the program’s eligibility requirement, which limits the credit to employers with non-highly-compensated employees. Health care offices often fit that profile: a physician or dentist supported by nurses, medical assistants, and administrative staff who may qualify under the threshold. Information firms, by contrast, typically employ more highly compensated workers, reducing their eligibility for the credit.

These differences suggest that even when awareness is high, industry structure and workforce composition shape which businesses can benefit most.

Businesses in distressed communities capture higher tax savings

Adoption rates were similar across all types of communities, roughly 38 percent, but the value of the credit differed. Small businesses in economically distressed areas captured higher savings on average (median $3,999 vs. $3,756 in more prosperous communities). This pattern suggests that the credit’s structure effectively channels support to employers facing higher startup costs.

Using the Economic Innovation Group’s Distressed Community Index, we classified communities in the fourth or fifth quintile as at-risk or distressed and those in the first or second quintile as comfortable or prosperous. When a ZIP code lacked an index value, we applied the state’s average rating.

Roughly one in five eligible small businesses in our sample was located in an at-risk or distressed community, yet their adoption rates matched those in more prosperous areas. Their savings, however, were 4.5 percent higher on average and 6.5 percent higher at the median. This highlights an under-recognized benefit of the Small Employer Pension Program: when awareness is widespread, the credit can deliver disproportionate value to communities working hardest to build financial security.

Conclusion

Awareness about estimated tax savings isn’t just information, it’s access.

In 2025, product updates made it easy for Gusto customers to claim millions in unused tax credits. The large uptake in the share of businesses that received draft forms to claim the Small Employer Pension Program shows how simple, targeted education and seamless product integrations that automate complex forms can help small businesses unlock benefits that they qualified for, but too often didn’t use. When employers understand their eligibility, their estimated annual savings, and can act with ease, they claim the resources they’ve earned and extend retirement security to more workers.

The early results are clear: when savings awareness meets simplicity and automation, small businesses respond across industries, regions, and communities. That’s a win not just for employers, but for the millions of workers who now have one more reason to feel confident about their future.