Almost 150 years ago, the American Express Company established the nation’s first private pension plan in an effort to create a career-oriented workforce. Back then, around 75% of men over age 65 were still in the workforce, and the main concern was helping families to provide for their aging members. Today’s retirement landscape bears some shocking similarities.
Today, around half of the U.S. workforce does not have access to a work-sponsored retirement plan. And those who work at very small companies are even less likely to have one—nearly 80% of companies with 10 employees or less offer no retirement benefit. 
With Social Security being largely unable to provide a livable wage for seniors and heavy increases in healthcare costs, there is a big concern in the country today about how to best help our aging population provide for their twilight years.
The SECURE Act and SECURE 2.0 are designed to make retirement plans more practical and available, especially for small companies, and are specifically aimed at closing the access gap for small businesses. The industry is responsible for implementing these legislative reforms and turning the SECURE promises into reality.
The Industry Is Too Focused on the Past
One glaring issue in the retirement industry is inertia among industry incumbents. While they possess extensive experience and infrastructure, traditional 401(k) providers have been slow to respond to the new opportunities created by the SECURE Acts.
Governments have noticed how the retirement industry has failed small employers. To date, 16 states have responded with legislation mandating that all employers—even very small ones—offer a retirement benefit to their teams. Four more offer voluntary plans with no mandates attached. Before the creation of OregonSaves, one of the oldest state plans, a market analysis identified more than a million Oregonians who were without access to a work-sponsored retirement plan.
The practical needs of small companies are not just a difference of degree but a difference of kind, necessitating new processes and technology. Innovative 401(k) companies have an advantage. Such providers can fill the void created by the traditional players’ reluctance to adapt to the evolving needs of small and micro-companies.
Remember Participant Outcomes
Beyond simply closing the access gap, the SECURE acts aim to improve participant outcomes.
Participation data suggests that improvement is slow. The industry standard for those in the lowest quartile by wage is a 25% participation rate in 2023. A decade prior, in 2013, the rate was just 18%, a small but noticeable improvement. Compare this data to that of an emergent fintech provider 401GO. They boast a 51% participation rate for those in the lowest quartile, a difference that more than doubles the industry average.
401(k) companies that prioritize participant outcomes can significantly enhance employees’ retirement security in small and micro-companies. This approach aligns with the intent of the SECURE acts and positions these companies as advocates for employees’ financial well-being.
Take a Mass Market Approach
The small and micro-company markets represent a substantial portion of American businesses. Over 3.3 million small businesses in the United States have 5-100 employees. This segment accounts for nearly half of private-sector jobs, highlighting the immense potential for 401(k) providers who can tap into this market.
A mass-market, e-commerce-style approach may be the best way forward. Traditionally, a B2B enterprise sales model has been used, focusing on large corporations, but market shifts have made an SMB sales model more practical. It’s helpful to partner with existing channels that focus on small business clients for efficient distribution. Payroll, insurance, and benefits providers — along with financial advisors, accountants, or other SMB consultants — can work together to create an ecosystem that benefits all parties involved, making clients much easier to reach and simultaneously making them happier.
Coupling this approach with automation technology creates a powerful change. Automation can drastically reduce the decision and setup time and nearly eliminate the need for human input, which, importantly, cuts costs substantially. The technology should be built for flexibility so that legislative changes — like those introduced by SECURE 2.0 — can be implemented quickly for maximum effectiveness.
This new model creates enough ease and affordability to make retirement plans practical for small businesses, substantially reducing the retirement gap for millions of American workers.
Mind the Gap
The SECURE Acts are reshaping the retirement planning landscape, making it more inclusive and participant-focused. While the intentions behind these legislative reforms are commendable, many industry incumbents have been slow to adapt to these changes. This vacuum presents an opportunity for nimble and tech-forward 401(k) companies to fill the gap and cater to the unique needs of small and micro-companies.
Let’s embrace the principles of the SECURE Acts and do what’s right for American workers.
Dan Beck is CEO of 401GO.
