Small Employers See Largest Gains in Retirement Coverage

The smallest U.S. employers are increasingly embracing workplace retirement plans. Using anonymized administrative payroll data, Gusto Inc., a payroll and benefits provider, found that the share of private sector businesses with two through 99 employees offering an active retirement plan increased to 31% in 2026, up from 19% in 2019, representing 64% growth over the seven-year period.

Businesses with fewer than five employees doubled their plan adoption rate, to 20% in 2026 from 10% in 2019. Firms with five through nine employees increased adoption to 36% from 22% during the same period.

The report found that retirement plan adoption rose across every industry studied, and professional services, finance and information-sector firms still led the market, with adoption rates approaching 45%. The highest proportional growth occurred in sectors that historically had some of the lowest participation rates. Hospitality businesses increased active plan adoption to 12% in 2026 from 4% in 2019, while recreation rose to 21% from 9% and agriculture climbed to 17% from 8%.

The increase in small-plan adoption has also helped expand access among hourly workers, who represented 63% of the small business workforce but only 43% of its retirement savers. According to the report, the share of hourly employees working for a business with a retirement plan increased to 38% in 2026 from 21% in 2019. By comparison, salaried workers with access to workplace plans rose to 55% from 45% during the same period.

Participation has risen as access has expanded. Among hourly workers who had a plan available, participation increased to 45% from 34%. The share of all hourly employees saving through work more than doubled, to 17% from 7%.

Several factors appeared to be driving the growth in small retirement plans, according to Gusto’s report. State automatic individual retirement account mandates played a role, particularly among the smallest employers. For businesses with two to five employees, retirement plan adoption increased 121% in states with auto-IRA requirements, compared with 54% in states without such programs.

Gusto pointed to a combination of labor-market competition, enhanced tax incentives under the SECURE 2.0 Act of 2022, and business owners’ desire to improve employee retention as likely contributors. The report noted that many small employers increasingly view retirement benefits as an important tool for attracting and keeping workers.