Small Businesses See 50% Boost in Retirement Plans Since 2020

Among businesses with two to 99 employees, 30% had an active retirement plan in 2025—a 50% increase from 2020, according to analysis from payroll solutions provider Gusto Inc. Measuring anonymized administrative payroll data from 2019 to 2025, Gusto found that an estimated 5.6 million workers gained access to retirement savings plans.

The 20 states and two cities that require employers to offer a qualified retirement plan or to enroll employees in a state-run individual retirement account have contributed to an increased awareness of retirement planning. The total share of workers with an active employer-offered retirement plan increased to 43% in 2025 from 31% in 2019.

The most significant increase was in the smallest businesses; according to Gusto, businesses with two to nine employees saw an 80% growth in retirement plan adoption. Measuring the share of businesses that offered active plans, businesses with five to nine employees gained 13 percentage points (22% to 35%), and businesses with 10 to 19 employees and 20 to 49 employees each gained 14 percentage points (34% to 48% and 44% to 58%, respectively).

In states with auto-IRA laws, businesses with two to five employees increased retirement plan adoption by 92%, and companies with five to nine employees increased plan adoption by 77%, compared with 48% and 35%, respectively, in states without such laws.

By industry, the largest relative gains in plan adoption between 2019 and 2025 were in hospitality (188% increase), recreation (132% increase) and agriculture (88% increase). Even the finance industry, the slowest-growing sector, still had a 30% increase in plan adoption, bringing the total percentage of participating companies to 42%. However, more than half of small businesses in all sectors lacked active retirement plans.

Participation and Deferral Rates

Along with plan expansion, overall plan participation grew slightly in small businesses. At the same time, employee deferral rates lag the industry averages across larger plans and businesses.

There were minimal gains in overall participation in employers’ plans (55% in 2025, compared with 54% in 2019) and salaried workers’ participation (72% in 2025, up from 70% in 2019). Hourly worker participation grew in the same period by nearly one-quarter (42% in 2025, up from 34% in 2019.)

However, the same report found that in 2025, average employee deferral rates ranged from 5% for businesses with fewer than 5 employees to 3.6% for businesses with 20 to 49 employees. Median annual retirement savings only grew for workers earning $5,000 to $7,499 per month between 2019 and 2025, and even then by just 3%.

The report noted that flat deferral rates, paired with surging inflation in 2021 and 2022, contributed to the overall decline in workers’ retirement savings.

“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,” wrote Nich Tremper, a senior economist at Gusto, in a blog post. “When deferral rates remain flat during periods of high inflation, each dollar saved buys less retirement security than before.”

Tremper wrote that “even modest differences in savings rates can translate into substantially lower retirement balances over a full career.”