More Small Businesses Are Offering Retirement Plans : Here's How Yours Can Afford One

For years, many small-business owners assumed retirement benefits were too expensive or too complicated.

That is changing.

According to Gusto’s State of Retirement 2026 research, the share of small businesses offering an active retirement plan grew from about 19% in 2019 to 31% in 2026. An “active” plan is one where at least one employee is contributing.

A major reason for this growth is the expanded tax support available through the SECURE 2.0 Act. These credits can reduce the cost of setting up and maintaining a retirement plan.

I know this can still feel like a lot to manage. The good news is that you have options. You do not need to choose the largest or most complex plan. You need to choose a plan that fits your business, your budget, and your team.

Why retirement plans are becoming more affordable

The cost of a retirement plan usually includes several pieces:

• Plan setup.

• Administration.

• Employee education.

• Payroll integration.

• Employer contributions, if required or offered.

• Ongoing compliance support.

SECURE 2.0 created or expanded tax credits that can offset some of these costs.

For eligible small employers with 50 or fewer employees, the federal startup credit may cover 100% of qualified startup costs, subject to the annual limit. Employers with 51 to 100 employees may generally qualify for a credit covering 50% of qualified costs.

The credit can be worth up to $5,000 per year for three years. Qualified costs may include plan setup, administration, and employee education.

Some employers may also qualify for:

• An additional $500 annual credit for three years for adding automatic enrollment.

• A separate credit for certain employer contributions. This credit can be worth up to $1,000 per eligible employee, subject to phaseouts and other requirements.

These credits are generally claimed with IRS Form 8881. They are credits, not simply deductions. That distinction matters because a credit directly reduces qualifying tax liability.

Your eligibility depends on factors such as employee count, employee compensation, whether you already sponsor another retirement plan, and the type of plan you establish. I recommend reviewing the details with your tax professional before making a final decision.

Three practical options for small businesses

There is no single best retirement plan for every business. The right choice depends on whether you have employees, how much flexibility you need, and whether you want to contribute directly to employee accounts.

Here is a simple comparison.

1. Starter 401(k)

A starter 401(k) is a simpler, deferral-only arrangement created under SECURE 2.0.

It is designed for eligible employers that do not already sponsor another retirement plan. Employees contribute through payroll deductions. The employer does not make matching or nonelective contributions under this arrangement.

For 2026, the employee deferral limit is generally $6,000. Employees age 50 and older may be able to contribute an additional catch-up amount.

A starter 401(k) may be a good fit when:

• You want to offer a familiar 401(k)-style benefit.

• You want employees to save through payroll deductions.

• You are not ready to commit to employer matching.

• You want a simpler starting point.

• You do not currently sponsor another retirement plan.

The starter 401(k) can make retirement savings available without requiring you to fund a match. That can make the budget easier to manage.

You still need to confirm plan requirements, automatic enrollment rules, employee notices, and provider fees. A plan provider can help with administration. I can help you organize the financial records and payroll information needed for that process.

2. SIMPLE IRA

A SIMPLE IRA is designed for small employers. In general, businesses with 100 or fewer employees who meet certain compensation requirements may be eligible.

Employees contribute through salary reductions. The employer must also make contributions. You generally choose between:

• A dollar-for-dollar match of employee contributions up to 3% of compensation.

• A nonelective contribution of 2% of compensation for eligible employees, whether or not they contribute.

For 2026, employees can generally contribute up to $17,000, with additional catch-up limits for eligible older workers. The IRS SIMPLE IRA contribution guidance explains the current limits and employer contribution rules.

A SIMPLE IRA may be a good fit when:

• You want a straightforward plan.

• You are comfortable making a required employer contribution.

• You want employees to save more than they could under a starter 401(k).

• You want less administration than a traditional 401(k).

The employer contribution is an important budgeting consideration. I recommend building it into your cash-flow forecast before adopting the plan.

3. SEP IRA

A SEP IRA is primarily funded by employer contributions. Employees do not make salary deferrals under a standard SEP IRA.

For 2026, employer contributions are generally limited to the lesser of:

• 25% of eligible compensation.

• $72,000.

The IRS SEP contribution guidance provides the current limits.

A SEP IRA may be a good fit when:

• Your business has few employees.

• Your income varies from year to year.

• You want the flexibility to contribute in profitable years.

• You prefer an employer-funded plan.

• You do not need employees to contribute through payroll.

The main point to remember is that SEP contributions generally must follow the plan’s allocation rules. If you contribute for yourself, you may also need to contribute for eligible employees using the same percentage of compensation.

How the tax credits can offset startup costs

Let’s look at a simplified example.

Suppose your business has 12 employees and qualifies for the maximum startup credit. Your qualified setup and administration costs total $4,000 for the year.

If you qualify for the 100% credit rate, the credit could offset those $4,000 in costs for that year. You may also be able to claim the credit for the next two years, subject to the applicable rules and limits.

If you add automatic enrollment, you may qualify for an additional credit of up to $500 per year for three years.

This does not mean every business will have zero costs. Provider fees, employer contributions, payroll changes, and compliance services may be treated differently. The credit also does not replace the need for accurate records.

That is why I recommend keeping a clean paper trail. Save:

• The plan agreement.

• Provider invoices.

• Employee education costs.

• Payroll records.

• Employee eligibility information.

• Contribution reports.

• Form 8881 calculations.

Organized books make it easier to see what you paid, what may qualify, and how the plan affects your tax return.

Retirement benefits can help you retain employees

Retirement plans are not only tax tools. They are employee benefits.

Gusto research found that employees offered retirement benefits were significantly less likely to leave during their first year. In one analysis, employees with access to an active employer 401(k) were 32% less likely to leave in a given month during their first year.

That makes sense. A retirement plan gives employees a reason to think long term. It shows that your business is investing in their future.

A plan can help you:

• Compete for qualified employees.

• Encourage employees to stay longer.

• Show appreciation beyond wages.

• Build a more stable team.

• Create a clearer benefits package.

You do not need to promise the most generous plan in your industry. You need to provide a clear, dependable benefit that employees understand and can use.

Communication matters. Explain how employees enroll, how payroll deductions work, whether the business contributes, and where they can find help. Simple guidance makes the benefit feel useful instead of confusing.

A calm way to evaluate your options

I suggest starting with four questions:

I also recommend reviewing your current cash flow before choosing a plan. Our stress-free forecasting guide for small businesses can help you organize that review.

Retirement planning does not have to feel overwhelming

Small businesses are offering retirement plans more often because the financial picture has improved. SECURE 2.0 tax credits can reduce startup costs. Several plan types are available. Employees increasingly value long-term benefits.

The process still requires care. You need to choose the right plan, understand employer contribution requirements, track payroll deductions, and claim the correct credits.

You do not have to sort through every detail alone.

I can help you keep the books organized, prepare the financial information your provider needs, and coordinate the tax records that support your filing. With the right plan and a clear process, offering retirement benefits can become one more part of running your business in perfect order.

This article is for general education and is not a substitute for individualized tax, legal, investment, or retirement-plan advice. Retirement plan rules and credit eligibility can change. Confirm your situation with a qualified tax professional and plan provider.