Small businesses are concerned about drawing and retaining top talent, but often not enough to pay for a workplace retirement plan, according to Fidelity Investments’ inaugural Small Business Retirement Index.

About half (48%) of small businesses with 99 or fewer employees who do not offer a workplace retirement plan said they cannot afford it, according to a March survey of 504 small business owners. About 22% of small business owners said they were too focused on running their businesses to start a plan, and 21% said they do not know how to start the process of offering a retirement plan.

“Small business owners are faced with so many challenges as they grow their business, from finding new customers to identifying their next round of funding,” Andrew Schreiner, senior vice president of small business retirement for Fidelity, said in a statement with the research.

The results come even as a combination of retirement plan incentives in the SECURE 2.0 Act of 2022 and state mandates are paving the way for more small businesses to offer workplace plans. Recordkeepers who serve smaller plans, such as Vestwell, Ubiquity + Retirement Savings and Icon Savings Plan, have been reporting a boom in business and have been predicting more to come.

The Fidelity research, however, showed that uptake may not be as easy for small business owners juggling a variety of costs amid inflation and market volatility. Only 34% of small businesses currently offer retirement savings to employees today, according to the study.

That lack of benefit may hurt worker attraction and retention, according to Schreiner at Boston-based Fidelity.

“In addition to helping their employees establish a secure financial future, a retirement benefit also can have an enormous impact in attracting and retaining top talent,” he said in the statement.

More than one-third (37%) of small business owners said they are worried about employee attraction, retention and well-being, which ranked as their second biggest worry, following inflation at 54%.

The Setting Every Community Up for Retirement Act of 2019 was designed to encourage small businesses to offer retirement plans, including pooled employer plans, or PEPs, which allow multiple employers to participant in one 401(k) plan. SECURE 2.0 seeks to further that effort by increasing for employers with 50 for fewer workers a three-year startup tax credit to 100% of administrative costs, up from the prior 50%, with an annual maximum of $5,000.

Small businesses also have access to the savings incentive match plan for employees (SIMPLE) and simplified employee pension (SEP) plans. Both types allow individuals to contribute a portion of their income to retirement savings in a tax-advantaged manner. 

In addition to the recent legislation, 14 states have some type of mandate on offering a retirement plan, and another 16 are considering such a law, according to the latest date from payroll provider ADP Inc.