In today’s competitive business landscape, offering a robust employee benefits package is essential for small businesses. A 401(k) plan is one of the most effective tools to attract talent, enhance employee satisfaction, and secure financial advantages. With new legislative incentives and growing state mandates in 2025, small businesses have a prime opportunity to implement a 401(k) plan tailored to their needs. Financial advisors and CPAs can guide businesses through this process, ensuring a seamless and strategic approach. Here’s why 2025 is the year to act.

Unprecedented Tax Credits Make Starting a 401(k) Affordable

The SECURE 2.0 Act, fully effective in 2025, has transformed the economics of launching a 401(k) plan for small businesses. Generous tax credits make setup and maintenance more affordable than ever:

• Startup Cost Credit: Small businesses with up to 100 employees can claim a tax credit of up to $5,000 to offset 100% of plan startup costs for the first three years. This covers expenses like plan design, recordkeeping, and employee education.
• Autoenrollment Credit: An additional $500 per year for three years is available for plans that include automatic enrollment, a feature proven to increase employee participation.

These credits significantly reduce the financial burden, making 2025 an ideal time to launch a 401(k). Financial advisors and CPAs can assist businesses in leveraging these incentives, integrating them into broader tax and financial strategies.

Stay Ahead of State-Mandated Retirement Programs

As of 2025, over 14 states, including California, Colorado, Minnesota, Delaware, and Connecticut, have implemented or are rolling out mandatory retirement programs for businesses with as few as five employees.  These state-sponsored IRA plans, while simple, come with limitations: lower contribution limits ($7,000 vs. $23,000 for a 401(k) in 2025), no employer contributions, and less flexibility for customization.

A 401(k) plan offers a superior alternative, providing higher contribution limits, tax-advantaged employer matching options, and the ability to tailor investment choices to a workforce’s needs. By launching a 401(k) now, businesses can comply with state mandates while offering a more attractive benefit. CPAs can help quantify the tax savings from employer contributions, while financial advisors can ensure the plan aligns with employees’ long-term financial goals.

Attract and Retain Top Talent in a Competitive Market

In 2025, employees prioritize benefits when choosing employers. A recent survey found that 60% of workers expect robust retirement benefits, and 78% say a 401(k) plan influences their decision to stay with a company. For small businesses competing with larger firms, a well-designed 401(k) levels the playing field.

Modern 401(k) plans include features like Roth 401(k) options, automatic enrollment, and diversified investment menus, catering to diverse workforces, from young professionals to seasoned employees. Participant education empowers employees to make informed retirement decisions, boosting satisfaction and loyalty. Financial advisors can offer personalized guidance to employees, while CPAs can help business owners optimize contributions to reduce taxable income (up to $70,000 combined employee and employer contributions in 2025).

Simplify Setup and Compliance with Expert Support

The perceived complexity of 401(k) plans can be a barrier for small businesses, but expert support simplifies the process. Streamlined setup processes, powered by advanced technology, integrate seamlessly with payroll systems, minimizing administrative hassle. Comprehensive compliance services ensure plans meet all regulatory requirements, from nondiscrimination testing to timely participant disclosures, allowing businesses to focus on operations.

Financial advisors and CPAs are key partners in this process. Advisors can recommend cost-effective, high-value 401(k) plans to their clients, enhancing their reputation. CPAs can advise on tax-advantaged contribution strategies, ensuring business owners maximize deductions while staying compliant. Together, they make launching a 401(k) straightforward and impactful.

Why Wait? Act Now

The combination of tax credits, state mandates, and employee expectations makes 2025 the perfect year to launch a 401(k) plan. By partnering with experienced professionals, small businesses can implement a competitive, compliant plan that drives growth and retention.

Take the First Step: Small businesses should contact a financial advisor, CPA, or NESA for a free consultation to explore affordable, tailored 401(k) plans. By acting in 2025, businesses can build a retirement plan that fosters financial security and long-term success.