Vanguard: Small Plans Trail Large Plans in Auto-Enrollment Adoption

While small business retirement plans face an uphill battle to improve their lagging participation rates, a newly published study by the Vanguard Group Inc. suggested that small-plan participants are saving in a manner similar to large-plan participants.

Vanguard’s report, “How America Saves 2026: Small Business Edition,” uses data from Vanguard Retirement Plan Access, a service for retirement plans with up to $50 million in assets. By year-end 2025, VRPA served approximately 21,000 plan sponsors and more than 1 million participants, and the average plan reported 49 participants and $4.6 million in assets—compared with Vanguard’s average large plan, which reported 3,500 participants and $590 million in assets.

Looking at the participation rates of eligible employees across all small plans, Vanguard determined there was a 60% participation rate in the cohort, compared with an 83% participation rate among eligible employees in large plans. Automatic enrollment helped boost participation—to 79% for VRPA plans and 94% for large plans—but not as effectively as it does for larger plans, as only 26% of VRPA plans offered automatic enrollment, compared with 61% of large plans.

Among engaged VRPA plan participants, Vanguard found their average saving rate of 7.5% was very close to the 7.6% rate of large-plan participants. Vanguard found that small plans’ most common default deferral rate was 3% (offered by 55% of plans in the data set), and only 39% offered defaults of 4% or higher, compared with 62% of large plans.

Combining participant and employer contribution rates, participants in small plans saved 11%, compared with 12% for large plans.

In an email to PLANADVISER, Jeff Clark, head of defined contribution research at Vanguard Workplace Solutions, noted, in comments sent by e-mail that the report underlined the importance of plan design.

“Small plans that use automatic enrollment achieve much higher participation rates than those relying solely on voluntary enrollment,” Clark wrote. “Automatic-enrollment adoption increased to 26% of plans in 2025, up from 15% in 2017.”

Long-Term Investing

Small plans offered an average of 20.4 investment fund options, compared with 17.7 for large plans, and the average VRPA participant used , compared with an average of 2.2 funds among all plans recordkept by Vanguard. Only 6% of VRPA participants traded in their accounts last year, and of the 70% invested in professionally managed allocations—including target-date funds and managed accounts–66% were entirely invested in a single target-date fund.

Vanguard noted that small plans with higher usage of professionally managed allocations generally had lower levels of trading, in line with the common assertion that retirement savers are usually long-term, buy-and-hold investors when they are placed in professionally managed investment strategies.

On a positive note, Vanguard found that most small-plan participants preserved their retirement assets. While 70% of small plans offered loans and 87% offered hardship withdrawals, only 6% of eligible participants had outstanding loans, and 3% took hardship withdrawals.

When participants in a small plan left their employer, only 18% of participants cashed out their retirement accounts, and 94% of total assets remained invested in retirement vehicles.