Small business owners understand both the importance and the challenge of attracting and retaining top talent. A competitive benefits package can be the difference between landing the right candidate or losing them to a larger competitor. While salary matters, it’s often the strength of the benefits, especially the retirement plan, that tips the scale.
Job candidates are seeking opportunities, but also need security and peace of mind. Many assume larger companies are better equipped to deliver stability by offering more robust benefits.
This gap in perception reflects a real disparity: small business employees are disproportionately less likely to have access to retirement plans, even though they make up nearly half of the U.S. workforce. And when employees fall behind financially, small business owners often suffer the consequences too, facing increased turnover and disengagement.
We’re in a volatile economic climate, but unemployment remains low, and companies are still adding jobs, so employees have every right to be pickier than ever. But that doesn’t mean small businesses are out of options. With the right strategy, they can meet rising expectations without compromising their bottom line, delivering stability for both their employees and their business.
Rethinking Priorities: Evolving Employee Expectations
Traditionally, small businesses have focused on providing immediate-impact benefits, such as health insurance. Retirement plans often fall to the bottom of the priority list, seen as too expensive, too complex, or simply not a game-changer as far as recruitment and retention.
However, over the past decade, employees have come to expect more. Today’s workforce views a retirement savings plan as more of a baseline benefit than a perk. In many cases, the absence of a 401(k) can be a dealbreaker for top talent weighing job offers, especially when larger companies can offer comprehensive packages.
The Retirement Gap and the Growing Need for Savings Solutions
The U.S. is facing a looming retirement crisis, and access is a major part of the problem. Without employer-sponsored plans, workers are significantly less likely to save for the future.
According to AARP research, Americans are about 15 times more likely to save for retirement when they have a workplace benefits plan, and 20 times more likely when contributions are automatic. Employer-sponsored 401(k)s do more than simply help employees invest. They help build long-term financial literacy, stability, and confidence.
Regulatory Pressure and Emerging Mandates
In response to this growing need, states have begun stepping in. Across the country, mandates now require small businesses to provide access to retirement plans. For example:
- Colorado requires businesses to either sponsor a qualified plan or enroll employees in the state’s SecureSavings auto-IRA program.
- California mandates participation in the CalSavers program for businesses with five or more employees unless they offer a private plan. Businesses with 1–4 employees aren’t required to enroll, but they can opt in voluntarily.
However, not all retirement plans are created equal. State-facilitated auto-IRAs tend to have limited investment choices, higher fees, and lower participation due to employee unfamiliarity.
By contrast, 401(k)s offer more robust options and better outcomes, and can make a stronger impression on prospective hires. But even regulatory pressures are shaping 401(k) plans. At the federal level, automatic enrollment requirements for most 401(k)s are expected to take effect in 2025. Businesses in all states will need to stay compliant and current.
Why 401(k)s Are the Gold Standard, and Easier Than Ever
For decades, 401(k) plans have served as the cornerstone of retirement savings in the U.S. They’re widely recognized, portable, and backed by clear tax advantages, making them one of the most effective and trusted vehicles for long-term financial security.
And today, they are more accessible than ever.
Historically, small businesses have hesitated to implement 401(k) plans due to several real and often prohibitive barriers. High administrative costs made plans feel out of reach. Investment options were often limited to expensive or underperforming funds. And managing a plan required time-consuming paperwork, ongoing oversight, and the risk of fiduciary liability if the plan didn’t meet regulatory standards.
Modern 401(k) solutions now offer:
- Low-cost, high-quality mutual funds and ETFs
- Streamlined, tech-enabled plan management
- Built-in fiduciary protections and support
- Options for both group plans and Solo 401(k)s, so every business, even sole proprietors, can participate.
The 401(k): A Strategic Advantage
Small business owners should view a 401(k) plan as more than just another benefit. The 401(k) can be a powerful tool for small businesses to compete in today’s labor market. It helps attract high-quality candidates, retain valuable employees, and stay ahead of evolving state and federal requirements. Giving your employees a way to invest in their retirement is a strategic investment in your team, your business, and your future.
Chad Parks is the founder and CEO of Ubiquity, a pioneer in small business retirement solutions that has helped more than 16,000 businesses and individuals contribute $3B towards retirement since 1999. As an advocate for small business retirement solutions, he has spent more than 25 years helping to shape policy, influence legislation, and champion financial wellness for all.
Parks is also the Executive Producer of Broken Eggs, a documentary meant to educate individuals about the looming retirement crisis in America.
By Chad Parks, CEO & Founder of Ubiquity
Photo by Getty Images for Unsplash
