Even with Auto-Enrollment, Cannabis Workers Reject 401(k)s

Key Takeaways

- *Participation is low:* Only about 39% of cannabis workers are
enrolled in workplace retirement plans.
- *Auto-enrollment isn’t enough:* Nearly one-third of auto-enrolled
employees opt out.
- *Plan features are strong:* Many cannabis 401(k)s already include
QDIAs, Roth options, loans, and auto-escalation.
- *The biggest gaps are education and admin:* Fewer than one-third offer
advisory guidance, and payroll integration remains limited.

*SEATTLE* – Only about 39 percent of cannabis industry employees are
enrolled in a workplace retirement plan — roughly 18 percentage points
below the national average — and even workers who are automatically signed
up are opting out at rates approaching one in three.

So says what is believed to be the first comprehensive retirement plan study
focused exclusively on the cannabis industry. Released this month by
Leading Retirement Solutions, a Seattle-based 401(k) provider with more
than a decade of experience serving cannabis businesses, the report
analyzed 140 cannabis 401(k) plans spanning more than 420 entities,
17,000-plus participants, and $71 million in assets.
The participation gap in one chart-worthy set of numbers

The participation gap is stark. According to the Bureau of Labor
Statistics, 56 percent of civilian workers in the United States are
enrolled in a workplace retirement plan. In cannabis, that figure sits at
38.8 percent — and among employees placed into auto-enrollment, 31.7
percent choose to opt out entirely.

The finding is notable because auto-enrollment — which signs up workers
automatically unless they actively decline — is widely considered the
single most effective tool for boosting retirement plan participation. The
fact that nearly a third of cannabis workers are rejecting even that nudge
points to deeper challenges, including financial precarity, workforce
demographics, and a historically limited culture of retirement planning in
the industry.
Auto-enrollment usually works. So why not here?

The average participant in cannabis-industry plans is just 33 years old,
and the average account balance stands at $6,547 — figures that reflect
both the youth of the workforce and the relative newness of retirement plan
adoption across cannabis businesses. Plan adoption itself, however, has
surged: from 2021 to 2025, the number of cannabis 401(k) plans grew 800
percent, representing a roughly ninefold increase and an average annual
growth rate of 73.21 percent.
Plan design is ahead of the participation curve

Perhaps the most counterintuitive finding in the report is how
sophisticated these plans already are. Despite lagging participation rates,
cannabis 401(k) plans have adopted features at rates that compare favorably
to more established industries.

Nearly all plans — 99 percent — allow in-service distributions, and 98
percent include a Qualified Default Investment Alternative, an option that
helps participants invest appropriately without requiring them to make
complex allocation decisions. In-plan Roth conversions are available in 91
percent of plans, and 89 percent offer participant loans. Three-quarters of
plans (74 percent) use auto-enrollment, and 57 percent automatically
escalate contributions over time.

Employer generosity is also notable: 64 percent of plans offer a
non-safe-harbor match, 31 percent use a safe-harbor design, and employers
contribute an average of 4 percent, which represents meaningful support for
workers who are actively saving. Among those who stay enrolled, savings
rates are encouraging: Employees defer an average of 3.4 percent of pay to
pre-tax contributions and 5 percent to Roth accounts, suggesting workers
who engage with these plans do so with intention.

Loan activity, meanwhile, is minimal. Only 0.65 percent of participants
carry an outstanding loan — a sign, the report notes, of strong plan design
and low leakage.
Where plans still fall short

Where the plans show clear room for improvement is in participant education
and back-office integration. Only 29 percent of plans provide advisory
education or guidance to employees, and payroll integration — which reduces
administrative errors and simplifies deferrals — is present in just 36
percent of plans.
Regulatory tailwinds could change the equation

The report arrives at a moment of potential regulatory transformation for
the cannabis industry. Federal efforts to reschedule cannabis are expected
to effectively eliminate Internal Revenue Code Section 280E, which
currently bars cannabis businesses from deducting ordinary business
expenses. That restriction has long squeezed margins and limited employers’
capacity to invest in benefits. Whether and when rescheduling may happen
remain open questions, but if 280E is removed, operators would gain access
to standard tax deductions and credits, potentially freeing up capital that
could flow toward expanded retirement offerings.

That shift, combined with the SECURE 2.0 Act’s requirement that most new
401(k) and 403(b) plans auto-enroll employees beginning with the 2025 plan
year and the accelerating spread of state-mandated retirement programs,
creates what the report describes as a convergence of pressure and
opportunity.

As of January 2026, twenty states have enacted state-facilitated retirement
programs, and seventeen are fully open to eligible employers and workers,
according to Georgetown University’s Center for Retirement Initiatives.
States including California, Colorado, Illinois, New York, Oregon, and
Washington already enforce or are launching “auto-IRA” programs that
require employers to either enroll workers in the state program or offer a
qualifying private plan. Cannabis employers are subject to the same
mandates as other businesses, and non-compliance carries fines and
potential regulatory scrutiny of operating licenses.
A benchmark for an industry coming of age

Leading Retirement Solutions Chief Executive Officer Kirsten Curry framed
the findings as a turning point. “Retirement benefits are no longer out of
reach for this industry,” she said. “They’re becoming a competitive
advantage.”

The data suggests the infrastructure for that advantage is largely in
place. The harder work — closing the gap between plan availability and
actual worker participation — remains.
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Curious about cannabis 401(k)s? Here’s what you need to know.

1. What percentage of cannabis workers are enrolled in a retirement plan?

About 39 percent of cannabis industry employees are currently enrolled
in a workplace retirement plan, according to a 2026 study by Leading
Retirement Solutions. That compares to 56 percent of civilian workers
nationally, according to the Bureau of Labor Statistics — a gap of roughly
18 percentage points.
2. How fast is retirement plan adoption growing in the cannabis industry?

Rapidly. The number of cannabis 401(k) plans grew 800 percent between
2021 and 2025 — a ninefold increase — at an average annual growth rate of
73.21 percent, according to the study.
3. Do cannabis employers offer matching contributions?

Yes. Employers in the study contributed an average of 4 percent, and 64
percent of plans offer a non-safe-harbor match. An additional 31 percent
use a safe-harbor plan design.
4. How much do cannabis industry employees contribute to their 401(k)?

Among enrolled participants, employees defer an average of 3.4 percent
of pay to pre-tax contributions and 5 percent to Roth accounts.
5. What is the average retirement account balance for cannabis industry
workers?

The average account balance is $6,547, reflecting both a young workforce
— average participant age is 33 — and the relative newness of retirement
plan adoption in the industry.
6. Are cannabis employers subject to state-mandated retirement programs?

Yes. Cannabis employers are subject to the same state-mandated
retirement requirements as any other business. As of January 2026, twenty
states have enacted programs, with seventeen fully open to eligible
employers and workers. Non-compliance can result in fines and regulatory
scrutiny of operating licenses.
7. What is IRC Section 280E and how does it affect cannabis retirement
plans?

Section 280E of the Internal Revenue Code currently prohibits cannabis
businesses from deducting ordinary business expenses, squeezing margins and
limiting capacity to invest in employee benefits including retirement
plans. Federal efforts to reschedule cannabis are expected to eliminate
280E, potentially freeing up capital for expanded retirement offerings.