Enrollment in 401(k) plans, America's flagship defined-contribution retirement system, is surging among small business workers. The growth comes as companies long left in the blind spot of retirement savings systems have begun participating actively following reforms including tax credits.
The Wall Street Journal reported on the 22nd (local time), citing a report from payroll and benefits service provider Gusto, that 401(k) enrollment among small business workers has increased approximately 36% since 2019. According to Gusto, "The number of workers at companies with fewer than 100 employees who have access to 401(k) plans has risen to 21.2 million, up 6 million from 15.6 million in 2019, with 55% of eligible workers now enrolled."
At large companies with 500 or more employees, over 90% of workers have typically enrolled in 401(k) plans. Small businesses, however, have faced obstacles including employer contribution requirements and plan administration fees.
Recently, intensifying competition for talent among small businesses has prompted more owners to adopt 401(k) plans as an employee benefit. The growth of online services targeting small businesses has lowered costs, while tax credits for employer matching contributions have also had a positive impact.
The Pooled Employer Plan (PEP), introduced by Congress in 2019, has proven particularly popular. The program allows multiple companies from different industries to participate jointly in a single retirement plan, generating significant fee savings that appeal to small businesses establishing retirement benefits for the first time. As of late 2024, 340 PEPs were operating with more than 51,000 participating businesses.
Mandatory retirement plan requirements in over 15 states have also driven growth. Following implementation of SECURE Act 2.0 in late 2022, employers in Illinois, California, New York and other states without retirement plans must either establish their own 401(k) plans or enroll employees in state-run programs. Workers may opt out if they choose.
The high savings limits of 401(k) plans also attract small business owners. The 2025 individual contribution limit for 401(k) plans is $24,500 (approximately 35 million won)—more than three times the average $7,500 limit (approximately 11 million won) for Roth IRA tax-advantaged retirement accounts used by state programs.