Vanguard finds 26% of small plans auto-enroll, against 61% of large plans

Vanguard's small-plan recordkeeping book covers about 21,000 plan sponsors and more than a million participants, and by the end of last year the average plan in it reported 49 participants and $4.6 million in assets, the population behind the firm's new "How America Saves 2026: Small Business Edition." The firm's average large plan reports 3,500 participants and $590 million in assets, so the two books are nowhere near each other on scale, but on saving they are much closer than the plan sizes suggest: among engaged participants, small-plan savers deferred 7.5% of pay and large-plan savers 7.6%.

Participation is where the two books separate: across the small plans in the study, 60% of eligible employees were saving against 83% at large plans, and where automatic enrollment is in place the figures rise to 79% and 94%. The feature lifts participation at both ends of the market; the difference is how often small plans install it, because just 26% of plans served by Vanguard Retirement Plan Access, the firm's service for plans with up to $50 million in assets, offered automatic enrollment, against 61% of large plans. That $50 million ceiling is generous for a book whose average plan holds $4.6 million, so the segment stretches from one-person operations to plans with dozens of employees and real committee agendas.

Jeff Clark, who leads defined contribution research at Vanguard Workplace Solutions, framed the result in comments emailed to PLANADVISER: "Small plans that use automatic enrollment achieve much higher participation rates than those relying solely on voluntary enrollment." He supplied the trend behind it: adoption reached 26% of small plans in 2025, up from 15% in 2017.

Eleven points over eight years is roughly 1.4 points a year, and 35 points still separate the small-plan adoption rate from the large-plan one. Closing that at the recent pace would take about 25 years, an extrapolation from two data points rather than a forecast, and a reminder that the gap has not been closing on its own.

The starting line has a gap of its own: the most common default deferral rate among small plans is 3% of pay, used by 55% of them, while only 39% set a default of 4% or higher, against 62% of large plans. Add employer contributions and the total lands at 11% of pay in small plans against 12% in large ones.

Participation reaches 79% at small plans using automatic enrollment against 60% across the cohort, a spread the report credits to the feature, while the menu runs to an average of 20.4 investment options in small plans against 17.7 in large ones. The typical participant across all plans Vanguard recordkeeps uses 2.2 funds. Small plans offer more choice and fewer defaults, which is close to the reverse of what the participation data reward.

The money sits in the default vehicle: seventy percent of Vanguard Retirement Plan Access participants were invested in professionally managed allocations such as target-date funds and managed accounts, and 66% of that group held a single target-date fund. Six percent of the small-plan participants traded last year, and Vanguard noted that plans with heavier use of professionally managed allocations generally had lower levels of trading.

The employers who would fill the small end of the market are in part the ones not yet in it: the Economic Innovation Group's September update put the coverage gap at 76.2 million workers, split into roughly 61 million employees and 15 million self-employed. Forming plans and enrolling the workers in them are separate problems, and both land on the same small employer deciding whether to act.

Relying on defaults is not a small-plan habit: Alight's August trading came to 0.008% of balances, with the QDIA pipeline doing the work and plan risk sitting in the funds that absorbed 74% of contributions. The small end runs the same machinery; what changes is the frequency with which the switches get flipped.

The comparisons carry a caveat: Vanguard's study draws on its own recordkeeping book rather than a sample of the market, and the distance between a 49-participant plan and a 3,500-participant one is partly a distance between two clienteles. The 7.5% and 7.6% saving rates cover engaged participants, so they describe behavior inside the plan rather than coverage of the eligible population.

The next edition will show whether the 26% moved and whether more of the plans that already auto-enroll pushed their default above 3%, the two settings the report's comparisons keep circling.