2025 Small Business Retirement Plans: Only 33% Offer Employee Benefits – Costs and Challenges Revealed

In 2024, only about one-third of small businesses are offering retirement plans to their employees, highlighting a significant opportunity for those who do to attract highly skilled candidates amid a tight labor market.

Key Insights

• Only 33% of small businesses provide retirement benefits, with many owners citing affordability as the main barrier.
• Over 80% of small business owners acknowledge they cannot match the comprehensive benefits packages offered by larger corporations.
• While the primary motivation for offering retirement plans is employee welfare, more than half of these businesses also see it as a strategic tool for recruitment.

According to Fidelity Investments’ 2023 Small Business Retirement Index, the majority of small business owners report that financial constraints prevent them from establishing retirement plans. The survey, which included 504 owners of companies with fewer than 100 employees, found that alongside inflation concerns, 37% identified employee recruitment and retention as a major challenge.

Andrew Schreiner, Senior Vice President of Small Business Retirement at Fidelity, emphasizes, “Providing retirement benefits not only secures employees’ financial futures but also plays a crucial role in attracting and retaining top talent.”

Recent employment reports confirm that unemployment rates remain low, and employers continue to seek qualified workers. The Fidelity survey reveals that 73% of small business owners feel unable to compete with larger firms, with 82% specifically pointing to benefits packages as a significant disadvantage.

Notably, small businesses employ nearly half of all American workers, underscoring the importance of retirement benefits in this sector.

Retirement Accounts: A Vital Workforce Asset

Beyond recruitment, many small business owners offer retirement plans out of a genuine desire to support their employees. Among the 34% who provide these benefits, 63% cite doing the right thing as their motivation, 53% acknowledge employee expectations, and 51% recognize the role of retirement plans in attracting talent.

However, the survey highlights barriers beyond cost: 21% of owners lack knowledge on how to establish these plans, and 22% feel too busy to manage the setup process.

Data from the Bureau of Labor Statistics indicates that 68% of private sector workers have access to retirement plans, with 51% actively participating. Approximately 60 million Americans hold 401(k) accounts, and another 60 million contribute to Individual Retirement Accounts, according to the Investment Company Institute.

Retirement accounts represent a substantial share of equity markets, with 90% of 401(k) participants investing in stocks, and over 40% maintaining portfolios with at least 80% stock holdings.

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