Team of co-workers standing around a table smiling and talking.
Lack of access to a workplace-sponsored retirement plan is common among small businesses. Fortunately, there are options that can help small business owners provide this benefit. — Getty Images/Westend61

Offering a retirement savings plan is one of the most important steps you can take toward helping your employees (and yourself) achieve your financial goals.

However, many small business owners put retirement savings on the back burner. Why? You're already wearing several hats, working around the clock, and watching your bottom line closely. Often, the upfront costs of starting a plan and the administrative burden that comes along with maintaining traditional 401(k) plans feel out of reach for small business owners.

With the help of retirement experts like Fidelity Investments, it’s never been easier to find and implement a small business retirement savings plan that suits the needs of your small business. Here’s what you need to know about supporting yourself and your employees on the road to financial wellness and security in retirement.

Why offer a retirement benefit?

Attract and retain talent

With so many companies looking to hire and fewer employees to fill open positions, employers must find ways to stand out from the competition. With only 30% of small businesses offering a retirement benefit today,[1] offering a quality retirement savings plan, like a 401(k), can help you stand out among other employers, enabling you to attract and retain top talent.

Help bridge the coverage gap for your employees

Retirement benefits are difficult to come by — especially for those working for small businesses. The sheer lack of access to a workplace-sponsored retirement plan has resulted in a widespread retirement coverage gap across the American workforce. By offering a retirement benefit to your employees, you can help bridge the gap for your employees.

Secure your own financial future

Setting up a retirement plan for your company can also help you plan for your own retirement. In addition to the long-term financial benefits, you may be eligible to receive up to $5,000 in tax credits per year for your small business over the first three years, depending on the type of retirement benefit you choose to provide.

Lack of access to a retirement savings plan is an ongoing widespread phenomenon

The retirement savings coverage gap is defined as those in the U.S. without a retirement savings plan. In the U.S., workers have generally relied on 401(k)s for retirement savings since the advent of modern workplace-sponsored plans in the 1970s.

However, today, 78% of employees who work for small businesses with under ten employees, and 65% of those who work for small businesses with ten to 24 employees, lack a retirement plan. In total, an estimated 57 million people working for private companies do not have access to a workplace retirement plan. Women and diverse and underserved communities are most impacted: According to the United States Census Bureau, 50% of women ages 55-66 have no personal retirement savings, in comparison to 47% of men who are the same age.

The gap exists partly due to the inaccessibility of traditional retirement and 401(k) plans, which can be expensive and complex. Employers have many factors to consider when deciding whether to offer retirement plans to their employees, including upfront costs, ongoing contributions, annual fees, and limited capacity/resources to continue providing the plan.

In total, an estimated 57 million people working for private companies do not have access to a workplace retirement plan.

How the SECURE Act and pooled employer plans are helping to close the gap

The 2019 passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act allowed for the creation of pooled employer plans (PEPs), which were introduced in 2021 to help close the gap by enabling employers from every industry to participate in one plan. PEPs are managed by a pooled plan provider (PPP) and are a simple solution for small business owners looking to help their employees — and themselves — save for retirement.

Securing your retirement as a small business owner

As an alternative to traditional 401(k) plans, PEPs encourage small businesses to participate in retirement planning by taking on some of the administrative burden and risks on behalf of the business. PEP providers like Fidelity handle recordkeeping and management duties, including filing Form 5500 annually and distributing plan disclosures. Since Fidelity handles the “heavy lifting” of administrative work, small business owners who enroll in a PEP can spend less time managing the day-to-day intricacies of the plan and more time focusing on their business.

How Fidelity Investments helps small business owners on the road to retirement

As a small business owner, getting started with retirement planning can be overwhelming. Fidelity can help. Small business owners who are looking to start a retirement plan for the first time might consider Fidelity’s PEP, Fidelity Advantage 401(k)SM.

Interested in learning more? See if Fidelity Advantage 401(k) is a good fit for your business. Visit Fidelity’s website to learn more and get started.

[1] Pew, “Contingent Workers and Barriers to Saving,” December 2017.

Published November 02, 2022