The Numbers Don't Lie: How Your 401(k) Helps Your Business

Good news for retirement plan sponsors — your benefit is working harder than you think.

Running a small business is relentless. You’re competing against larger companies for the same talented workers, often without the HR department, the brand recognition, or the deep benefits budget that bigger employers enjoy. So when it comes to recruiting and keeping great people, every advantage matters.

Here’s one you may be underestimating: your 401(k) plan.

If you’re already sponsoring a retirement plan for your employees, you’re offering something that more workers say they want — and that more employers report is genuinely moving the needle on hiring and retention. The data is clear, the tax advantages are real, and for small businesses especially, the return on this investment is hard to match.

Let’s look at what the numbers actually say. 

Workers Are Treating the 401(k) as a Non-Negotiable

The days of workers viewing a retirement plan as a pleasant bonus are over. A study by Vestwell found that 85% of employees now expect their employer to offer retirement benefits — up from 72% just the year prior — and 89% said they would be more likely to continue working for an employer who offers a retirement benefit.

That shift from “nice to have” to “expected” is significant. It means that small businesses without a retirement plan aren’t just missing out on a perk — they’re creating a gap that candidates actively notice and factor into their decisions.

The data reinforces this: 65% of employees say they would not accept a new job offer if retirement plan benefits weren’t included. For a small business owner trying to close a hire, that’s a meaningful number.

The 401(k) Has Climbed the Benefits Rankings, Fast

Not long ago, a 401(k) plan was considered secondary to health insurance in most employee surveys. That gap has narrowed dramatically, as analysis of the ADP TotalSource Benefits Employee Survey by both HR.com and 401k Specialist Magazine point out. Consider, for example: 

In 2024, 62% of employees ranked 401(k) plans as one of their top three most important benefits — a significant jump from just 30% in 2018, and for the first time in survey history, 401(k) plans tied with dental insurance as the second most important benefit.

Across multiple surveys and methodologies, the trend points in the same direction: workers are thinking more about their financial futures, and they’re looking to their employers for help getting there.For small business owners, this is genuinely good news. A well-run 401(k) plan is no longer a benefit that only enterprise companies can leverage in recruiting conversations — it’s a tool that puts you directly in the running.

Employers Confirm It’s Working

It’s one thing for employees to say they value retirement benefits. It’s another for employers to report that offering one is actually changing their hiring outcomes. According to research by Gusto, 70% of employers say that offering a retirement benefit has positively impacted their ability to recruit and hire talent — and one in two employees would turn down a job offer from a company that did not offer a retirement benefit.

Among small businesses specifically, 38% identify improving employee engagement as a priority and 36% point to retaining employees as an ongoing challenge — making the retirement plan a benefit that demonstrably improves both metrics especially valuable.

Do the Math on Turnover — Then Reconsider the Value of the 401(k) 

One of the most compelling ways to think about the value of a retirement plan is through the lens of what it costs every time an employee leaves. Turnover is expensive — far more expensive than most small business owners realize until they sit down and calculate it.

According to the Society for Human Resource Management (SHRM), the average cost of hiring a new employee reaches nearly $4,700 — but the total cost of filling an open position can run as high as three or four times the departing employee’s annual salary when you factor in lost productivity, training time, the impact on team morale, and missed revenue while the role sits vacant.

Data from Express Employment Professionals reveals that the average cost of turnover has climbed to $45,236 per worker when factoring in rehiring fees and lost momentum. For a lean team where every person wears multiple hats, losing even one veteran employee means a massive drain on company knowledge and weeks of sub-par productivity while a new hire ramps up. 

Tax Advantages Make Retirement Plans Affordable

Thanks to the SECURE 2.0 Act of 2022, the government has made it significantly more affordable to start and maintain a 401(k) plan, particularly for smaller employers, as ADP has summarized. 

The IRS Retirement Plans Startup Costs Tax Credit Page highlights the different credits available to eligible small businesses, including these three:

• Startup cost credit: Eligible employers may claim up to 100% of their qualified startup costs for adopting and maintaining a new 401(k) plan, up to $5,000 per year for the first three years.

• Auto-enrollment credit: Employers who include an automatic enrollment feature can earn an additional $500 per year for the first three years the feature is in place.

• Employer contribution credit: A tax credit of up to 100% of employer matching contributions, up to $1,000 per employee, is available in the first two years — phasing down over five years — with the full benefit available to employers with 50 or fewer employees. That’s potentially $50,000 in tax credits over the first two years alone for eligible smaller employers.

Taken together, these credits can offset a substantial portion of the cost of sponsoring a retirement plan, particularly in the early years — turning what many small business owners assumed was a major expense into something far more manageable.

Financial Stress Is a Productivity Problem — Your 401(k) Helps

There’s one more aspect to the benefits of retirement plan sponsorship that doesn’t get discussed enough: the impact of employee financial stress on the workplace itself. Findings from PwC’s 2026 Employee Financial Wellness Survey reveal that financially stressed employees are five times more likely to be distracted at work, spending an average of three or more hours per week of work time dealing with personal financial concerns.

A retirement plan — especially one with good participant education and straightforward enrollment — gives employees a concrete mechanism for making financial progress. That reduces stress, improves focus, and signals that the company is genuinely invested in their long-term wellbeing. For a small business where culture and team cohesion often drive performance, those numbers carry real weight.

One Thing Every 401(k) Sponsor Should Know

Launching a retirement plan is a massive win for recruiting and retaining a great team—but it means you must protect yourself, even as you support your staff. As a plan sponsor, you are an ERISA fiduciary. That means personal legal obligations around investment monitoring, fee oversight, administrative accuracy, and cybersecurity — any of which can expose you to personal liability if neglected. 

The ERISA Fidelity Bond that federal law requires protects the plan’s assets, but it does not protect you personally in the event of errors and omissions related to 401k plan sponsorship. 

That’s where fiduciary liability insurance comes in — and where Colonial Surety Company has built a solution specifically designed for retirement plan sponsors like you.

The Colonial Surety Company ERISA Bundle combines three essential protections in one seamless package:

• ERISA Fidelity Bond — Fulfills your federal mandate to protect plan assets from fraud and dishonesty
• Fiduciary Liability Insurance — Provides up to $1,000,000 in coverage for legal defense costs and penalties arising from fiduciary errors, administrative oversights, and participant claims
• Complimentary $50,000 Cyber Liability Insurance — Protects your plan and company against regulatory actions following a data breach, addressing the DOL’s cybersecurity guidance directly by including expert response services.

Colonial Surety Company is Treasury-Listed, rated “A” (Excellent) by AM Best, and has been in business since 1930. As a direct carrier — not a broker — there are no agent markups or unnecessary fees. You can quote, purchase, and download proof of coverage entirely online in minutes.

You’ve already made the smart move by offering your employees a retirement plan. Now make sure you’re protected while you do sponsor the plan.

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