Small Businesses and 401(k)s: What to Know

Dec 10 2025 17:40

For many small businesses, the idea of offering a 401(k) has long felt overwhelming—too costly, too complicated, or simply out of reach. Running a business already demands so much time and energy that adding employee benefits can seem daunting. But thanks to recent changes under SECURE 2.0, offering a retirement plan is now far more accessible and affordable than most owners realize.

401(k)s Are Becoming More Common

Even though fewer than one in four small businesses currently offer a 401(k), more are adopting plans each year as the process becomes simpler and more cost-effective.

Tax Credits Can Make Startup Costs Manageable

Businesses with up to 100 employees may qualify for up to $5,000 per year in tax credits for plan startup costs during each of the first three years. There is also an additional credit of up to $1,000 per employee for employer contributions.

Eligibility Rules Are Straightforward

To participate, employees must have earned at least $5,000 in the prior year. This simple requirement helps ensure clarity for both employers and staff.

Auto-Enrollment Boosts Participation

Most new 401(k) plans now include auto-enrollment, which significantly increases employee participation and helps workers start saving earlier.

A Strong Plan Supports Hiring and Retention

A well-designed 401(k) can make your business more competitive when attracting and keeping talent. Plus, both employer contributions and plan expenses are tax-deductible, offering added financial benefits.

More Options and More Flexibility

There are now more flexible and affordable 401(k) solutions available than ever before, giving small businesses the freedom to choose what works best for their needs and budgets.

Offering a 401(k) is no longer the administrative or financial burden it once was. If you want to stay competitive, now is the ideal time to explore your options. Speak with a financial or benefits advisor to create a plan that fits your business and supports your team’s long-term success.