Small Business 401(k) Access Soars on Fee Waivers, Tax Credits

SEATTLE, WA – December 01, 2025 – A significant shift is underway in the U.S. retirement landscape, as a confluence of aggressive market competition and powerful legislative incentives is finally dismantling the financial barriers that have long prevented small businesses from offering 401(k) plans. Highlighting this trend, digital retirement plan provider ShareBuilder 401k recently announced it will waive all setup costs for small business plans through December 23, 2025, a move that, when combined with new federal tax credits, could fundamentally alter the retirement prospects for millions of American workers.

This initiative is more than a simple promotion; it represents a critical tipping point in addressing a persistent gap in the nation's retirement infrastructure. For decades, the vast majority of small businesses—which employ nearly half of the American workforce—have been shut out of the 401(k) market due to perceived high costs and administrative burdens. Now, the convergence of provider-led cost-cutting and the landmark SECURE Act 2.0 is creating a new paradigm of accessibility.

The New Economics of Retirement Benefits

The primary obstacle for small business owners has always been cost. An independent study sponsored by ShareBuilder 401k found that 22% of owners believe providing a 401(k) is simply too expensive. Industry data supports this perception, with typical setup fees for a new plan ranging from $500 to over $2,000, a significant upfront investment for a small enterprise. ShareBuilder 401k's offer to eliminate its setup fees, saving businesses up to $750, directly targets this initial hurdle.

"The key for all Americans to build financial security in retirement is contributing consistently to a tax advantaged account," said Stuart Robertson, CEO of ShareBuilder 401k, in the company's announcement. He noted that many business owners "don't think they are big enough to qualify for one or think 401(k) benefits are expensive."

However, the fee waiver is only half of the story. The real game-changer is its synergy with the SECURE Act 2.0 of 2022. This legislation dramatically enhances the financial incentives for small businesses to launch retirement plans. For businesses with 50 or fewer employees, the act provides a tax credit covering 100% of qualified startup costs, up to an annual cap of $5,000 for the first three years. This credit alone can more than offset typical administrative fees.

Furthermore, the act introduced a new, powerful tax credit for employer contributions. For the first five years of a plan, eligible businesses can receive a credit of up to $1,000 per employee for matching or profit-sharing contributions. It covers 100% of these contributions in the first two years, then phases down. When combined, these credits can make sponsoring a 401(k) plan "nearly cost-neutral" for many small businesses during the critical initial years, transforming the decision from a financial burden into a strategic investment.

A Strategic Imperative in the War for Talent

With the financial barriers eroding, the strategic calculus for small business owners is shifting. In today's tight labor market, offering a competitive benefits package is no longer a luxury but a necessity for attracting and retaining top talent. Historically, large corporations have used robust retirement plans as a key differentiator, leaving smaller firms at a distinct disadvantage. Research shows that only about a third of small businesses currently offer a 401(k), creating a significant benefits gap for their employees.

The new accessibility of low-cost 401(k)s allows small and mid-sized enterprises to level the playing field. A 401(k) plan is a powerful signal to prospective and current employees that an employer is invested in their long-term financial well-being. This can be a decisive factor for a candidate choosing between a role at a startup and one at a large, established company.

Moreover, the availability of such plans can improve employee morale, reduce financial stress, and decrease turnover. As financial wellness becomes an increasingly important component of overall employee well-being, the ability to offer a path to a secure retirement is a critical tool for building a loyal and engaged workforce. The administrative burden, another major deterrent, is also being addressed by digital-first providers who leverage technology to automate payroll integration, compliance testing, and annual reporting, effectively allowing a business owner to "install [a plan] over their lunch hour," as Robertson puts it.

A Fiercely Competitive Provider Landscape

ShareBuilder 401k's move is indicative of a broader, intensely competitive market focused on capturing the vast, underserved small business segment. The company, a pioneer in all-ETF, index-based 401(k)s since 2005, is not alone in its push to lower entry barriers. Other prominent digital providers like Human Interest, ForUsAll, and Guideline are also vying for market share with aggressive pricing and streamlined, tech-driven platforms.

While some competitors like Fidelity still list startup fees around $500, others like ForUsAll have built their models around a "no setup fee" promise. This competitive pressure is driving down costs across the board and forcing providers to differentiate through service, investment options, and integration capabilities. The focus on low-cost, index-based ETF portfolios, which ShareBuilder 401k champions, is another key trend. These investment vehicles minimize the internal fees that can eat away at an employee's long-term returns, aligning with a growing demand for transparency and cost-effectiveness in retirement savings.

This market evolution benefits small businesses not only through lower direct costs but also by offering a wider array of choices. Employers can now select from providers that offer everything from basic, low-cost plans to more sophisticated options with features like access to alternative investments or dedicated financial advisory services for employees, all while offloading much of the fiduciary responsibility to the provider.

Empowering a New Generation of Retirement Savers

Ultimately, the most profound impact of this market shift will be felt by the millions of employees who will gain access to a workplace retirement plan for the first time. The power of automated, tax-advantaged saving through a 401(k) is a cornerstone of wealth creation in the United States. Access to such a plan dramatically increases the likelihood that an individual will save adequately for retirement.

The timing is particularly advantageous, as contribution limits continue to rise. For 2025, employees can defer up to $23,500 into their 401(k), with those aged 50 and over able to contribute an additional $7,500. Looking ahead, the press release from ShareBuilder 401k even projects a 2026 deferral limit of $24,500, with a special catch-up for those aged 60-63 reaching $11,250. These expanding limits, combined with the power of compounding returns over decades, can enable employees to build substantial nest eggs.

Furthermore, the SECURE Act 2.0 has broadened eligibility, now requiring employers to allow long-term, part-time employees who work at least 500 hours for two consecutive years to participate in their 401(k) plans. This provision, coupled with the mandatory auto-enrollment features for most new plans starting in 2025, ensures that the net is cast as widely as possible, pulling more workers into the retirement savings system. The combination of legislative tailwinds and market-driven innovation is creating a powerful current, moving the American workforce toward a more financially secure future.