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Small Business Owners Offering Employee Retirement Plans Are More Attuned to Employee Needs During Uncertain Time

Two-thirds of small businesses without a retirement plan say they are ‘highly likely’ to offer one, but only 49% have taken

While most Americans saving for retirement do so through their employer’s retirement plan offering, small businesses are much less likely than larger companies to offer a plan. Only 28% of businesses with less than 10 employees offer retirement plans and only 51% of businesses with 10-24 employees offer them.1 New research from Capital Group, one of the world’s largest and most experienced active investment managers and a leading provider of retirement solutions for small businesses, found that many business owners may not be offering a plan due to misperceptions around cost and company size requirements.

“Offering a retirement plan to one’s employees can be a critical asset for a business owner who wants to retain and attract new talent, but concerns about cost and a lack of sufficient guidance are holding many of them back,” said Renee Grimm, Senior Vice President, Retirement Plans, Capital Group. “With the passing of the SECURE 2.02 Act earlier this year, now may be a great time for small business owners to set up a retirement plan. A financial advisor can guide business owners on how to maximize the full benefits of offering a plan, including important tax credits for themselves.”

In Capital Group’s survey of over 600 small business owners and their employees, both business owners and employees cited inflation as the biggest factor impacting their finances in the last 3-6 months, closely followed by the rising cost of fuel, the Covid-19 pandemic, and healthcare costs. The survey revealed that business owners offering retirement plans were more aware and sympathetic to their employees’ financial situations:

  • 71% of business owners who offer a retirement plan reported inflation was their employees’ biggest financial challenge, with 79% of employees agreeing.
  • In stark contrast, only 28% of owners who don’t offer a plan understood inflation/cost of living to be the primary factor impacting their employees’ finances, compared to the 81% of employees who reported this as their biggest challenge.
  • Additionally, 73% of small business owners who offer a retirement plan ranked helping their employees save for the future as the primary reason for offering a plan, over other reasons such as retaining current employees (49%) and reducing their company tax liability (23%).

The survey uncovered that business owners who do not offer a retirement plan may be unaware of their employees’ strong desire to have one, with more than three-quarters (78%) of employees expressing interest in participating in a plan with a company match feature. Additionally:

  • Over two-thirds of small business owners (73%) without a plan said they were ‘highly likely’ to offer one in the next two years – but only 49% have taken steps to act on that.
  • When asked where they will go for more information about setting up a plan, small business owners ranked family, friends, and social media (31%, 31%, and 24% respectively) before seeking guidance from a financial advisor (15%). In fact, only 39% of business owners without a plan reported even having a financial advisor.
  • Perceived expense is a key friction area for those not offering a plan, with more than a third of small businesses (34%) citing plan expense as their main concern.
  • A 401(k) plan is the most popular retirement plan offered by small business owners (88%), followed by a SIMPLE IRA at only 30%, suggesting there may be low awareness of the latter as a potentially cost-effective option.
  • Of note to advisors, 94% of small business owners who do not currently offer a plan said they would be likely to open one if the company were to receive startup plan tax incentives or credits.

“Too many people in this country are not saving enough for retirement, including many who work for the very small businesses which are the engine of our economy. The passing of the SECURE 2.0 Act will remove the last barriers for many, enabling employers and the retirement industry to come together to help more Americans save for retirement,” commented Ralph Haberli, Head of Institutional Retirement at Capital Group. “Additionally, while 12 states have enacted legislation requiring small businesses to offer retirement plans, there appears to still be low awareness of the range of affordable solutions available, including SEP and SIMPLE IRAs. A financial advisor can be a valuable partner to guide business owners through the steps and implications of setting up the plan that is right for them.”

Capital Group’s survey shows small business owners should:

  • Consider the full range of benefits to your business of setting up a retirement plan – in addition to helping your employees save for the future – including attracting and retaining talent to stay competitive and potentially saving money by taking advantage of new and enhanced startup tax credits.
  • Connect with a financial professional to help you choose the right plan for your business and guide you through the steps to get started.
  • Act soon as certain retirement plans will require a start date no later than October 1, 2023 to become effective this calendar year.


Capital Group partnered with Escalent, a data analytics and advisory firm, to conduct an online survey of 621 small business owners and employees between September–December 2022. The groups included a mix of small business owners and employees aged 21 years and older. The small business owners surveyed included both those that do and do not currently offer an employee retirement plan.

1.Data as of December 2022 from SCORE, a U.S. Small Business Administration resource partner.

2.Capital Group: A closer look at SECURE 2.0 Act startup tax credits