Despite ongoing workforce challenges, a panel of retirement industry experts are confident that by 2026 more small companies will offer a workplace retirement plan and more employees will participate.
This is according to Transamerica’s latest installment in the Prescience 2026 series, which is a multi-year initiative that surveys and interviews workplace benefit professionals and industry experts on a wide range of employee benefits issues looking toward 2026 to uncover trends and opportunities in the benefits landscape.
As the fourth entry in the series,[1] Small Business Benefits Trends reveals that panelists are overwhelmingly optimistic that the number of small business employees with access to a defined contribution (DC) plan will have increased by the end of 2026.
In fact, 82% of the panel “agrees” or “strongly agrees” that the percentage of private-sector employees working in establishments with fewer than 100 employees offering a DC plan will have grown to 60%, up from 51% in March 2020.
“The experts on the Prescience 2026 Council see a sunny future for small businesses,” stated Wendy Daniels, head of marketing and customer experience for Workplace Solutions at Transamerica. “In today's marketplace, smaller businesses have more options than ever to realize cost efficiencies and ease the administrative burden of offering a retirement plan.”
That said, the report also notes, however, that the survey responses and subsequent discussions reveal a need for more agreement about how that milestone might be reached.
Pooled Plan Arrangements
Panelists were asked how they felt about the potential impact on small businesses by the end of 2026 on provisions contained in the SECURE Act and SECURE 2.0.
Beginning with pooled arrangements—such as pooled employer plans (PEPs), multiple employer plans (MEPs) and groups of plans (GoPs)—panelists were asked to what extent they agreed or disagreed with the statement, “More than 50% of employers with fewer than 100 employees offering retirement benefits will be covered by pooled arrangements such as PEP, MEP, or GoP, or a Professional Employer Organization (PEO).”
The experts had a clear position, with a strong majority (68%) “disagreeing” or “strongly disagreeing” with the statement, suggesting that the do not expect to see the percentage of small businesses offering pooled arrangements to exceed 50% by the end of 2026.
In looking at specific types of arrangements, the panel was then asked whether they think small business will respond to the availability of pooled arrangements to address their need/desire to offer a DC plan.
When asked whether the number of association MEPs will have risen to over 500 (from 149 at year-end 2019), the responses were evenly split, with 34% agreeing, 32% disagreeing and 32% neither agreeing nor disagreeing.
Asked specifically about PEPs, 52% of panelists agreed or strongly agreed that the number of PPPs will have risen above 200, from the 60 existing at year-end 2019.
Transamerica also asked panelists about the potential growth of PEOs, and whether they agreed or disagreed that the number of PEOs will have risen to over 600 (from 299 at year-end 2019). Yet again, the panelists were split, with 25% agreeing/strongly agreeing, 30% disagreeing/strongly disagreeing, and 45% neither agreeing nor disagreeing.
“A big question is about the state and future of the PEO industry itself. Is it consolidating? It seems to be. What impact, if any, will that have on the number of plans? It is a good question. The future of the PEO industry is as compelling as the future of pooled arrangements,” observes Catherine Collinson, CEO and President of nonprofit Transamerica Institute and Transamerica Center for Retirement Studies.
State-Mandated Plans
Panelists also predict that the number of states enacting mandatory workplace retirement plan coverage to increase only slightly above current levels. But as more states mandate coverage for employees of even the smallest employers, the decision about joining the state's arrangement or providing a company-sponsored plan becomes more urgent, the report observes.
Notably, responses were mixed when panelists were asked what type of plan small employers might choose when facing a new state mandate; 45% predicted they would select a single-employer plan, and 40% a pooled arrangement. When the question was expanded to include small employers offering a plan for the first time in any state, the results were equal at 47% each.
What could all this mean for small businesses? While state mandates have positive intentions, the mandated plan may not provide employees with enough help to reach their retirement goals, the report further emphasizes.
Company-sponsored plans may be a better option for small employers, which Transamerica notes is perhaps the reason a significant majority of respondents forecast an increase in the number of small businesses offering an employee-funded DC plan. In this case, 86% said they agree or strongly agree that the percentage will have increased to 55% in 2026 from 46% in 2020.
Participation and Engagement
Meanwhile, nearly two-thirds (63%) of respondents foresee 80% of employees who have access to a workplace retirement plan participating by the end of 2026, from 73% in 2021. However, panelist responses suggest that most believe automatic enrollment is primarily responsible for the anticipated increase.
To that end, the panelists see small plan sponsors using plan design changes to reinforce positive saving and investing behaviors. When asked to what extent they agree or disagree that the percentage of small plan sponsors automatically enrolling employees will have risen to 30% in 2026 (from 20% in 2021), they resoundingly agree. In fact, 86% of respondents agree or strongly agree with the statement.
About the Study
The fourth poll in the Prescience 2026 survey was focused on the small employer market (under 100 employees), where the panelists were asked to consider trends in financial well-being and retirement benefits relative to small employers. Thirty-six benefits industry specialists from across the nation answered a 47-question survey. Panelists represent trade groups, research organizations, consulting firms, academic institutions, advisory firms, investment management firms, service providers and trade media. Transamerica chose panelists based on their positions as thought leaders and experienced professionals in the retirement plan, employee benefits, and financial well-being business. The survey was fielded in April 2023.
[1] The other three entries included employee financial well-being; trends in the U.S. economy; and dynamics of the American workforce.
