The 401(k) Shake-Up in Cannabis: What SMBs Need to Know and Do Now

1. What’s Going On with 401(k) Plans in the Cannabis Industry?

In 2024, a wave of 401(k) plan terminations hit the cannabis industry as several major custodial providers abruptly pulled out due to ongoing regulatory uncertainty. This move left many cannabis employers scrambling to find replacement providers and safeguard their employees’ retirement savings.

Despite growing compliance efforts and a workforce of over 440,000, cannabis companies continue to face exclusion from basic financial services—401(k) plans included. With only about 7% of cannabis employees currently enrolled in retirement plans (compared to 52% in other industries), this gap highlights a critical challenge—and opportunity—for cannabis businesses in 2025.

This blog unpacks what’s changing, why it matters, and what proactive cannabis employers can do right now to stay ahead.

2. Why It Matters to Cannabis SMBs

For small and mid-sized cannabis businesses, offering a 401(k) isn’t just about compliance—it’s about credibility.

1. Attracting and Retaining Talent

With mainstream industries offering competitive retirement benefits, cannabis businesses without a 401(k) risk losing top talent to better-equipped employers. In a tight labor market, benefits like retirement plans make a real difference in offer acceptance and long-term employee loyalty.

2. Supporting Financial Wellness

Financial stress is a silent productivity killer. When employees feel secure about their future, they’re more focused and engaged at work. A 401(k) plan is a simple yet powerful way to boost financial well-being across your workforce.

3. Building Trust and Legitimacy

Offering retirement benefits signals maturity and professionalism. It tells employees—and the broader market—that your cannabis business is here to stay, not operating on the fringe.
In short, a 401(k) plan can be the bridge between being seen as just another startup and becoming a respected employer in a competitive space.

3. Common Challenges for Cannabis Employers Offering 401(k) Plans

Despite the clear benefits, cannabis businesses face a unique set of hurdles when it comes to offering 401(k) plans. These aren’t just technical issues—they’re systemic roadblocks that require tailored solutions.

1. Provider Pullouts

In mid-2024, several 401(k) custodians exited the cannabis space with little warning. This sudden withdrawal left many businesses scrambling to protect employee accounts and avoid compliance risks.

2. Regulatory Grey Zones

Federal illegality continues to scare off many national financial service providers, especially those bound by cross-state or federal regulations. Even those who want to help often lack the compliance infrastructure to do so.

3. Limited Banking Relationships

Secure, long-term banking partnerships are already tough in cannabis. Layering retirement plan administration on top adds complexity most small teams aren’t equipped to handle.

4. Low Participation Rates

Many cannabis employees, especially younger or hourly workers, may not see the value of long-term savings—or may prioritize more immediate financial needs. This contributes to industry-wide underutilization of benefits like 401(k)s.
Despite these headwinds, the story doesn’t have to end here. Next up: what you can do.

4. What Cannabis Employers Should Do?

The challenges are real—but so are the solutions. Forward-thinking cannabis SMBs can still offer meaningful retirement benefits by taking a few strategic steps.

1. Work with Cannabis-Friendly Providers

Seek out financial partners who specialize in serving cannabis businesses. These providers understand the regulatory nuances and offer compliant, tailored 401(k) solutions. If you’re unsure where to start, work with a benefits broker experienced in the cannabis sector—they often have vetted connections.

2. Communicate Early and Often

If your 401(k) provider is exiting the space, don’t wait. Proactively communicate with employees about the change, outline next steps, and reassure them their savings are secure. Transparency builds trust during uncertain transitions.

3. Educate Employees

Don’t assume employees will “get it.” Host short info sessions, share simple guides, or bring in an advisor to explain how 401(k)s work and why they matter. Education is key to increasing participation and appreciation.

4. Advocate as an Industry

Join forces with cannabis trade associations or HR coalitions to push for better access to financial services. Support legislation like the SAFER Banking Act, which could unlock more retirement plan options if passed.

5. Stay Compliant

If switching providers, ensure proper rollover procedures are followed and that all plan documents meet IRS and DOL requirements. Non-compliance can trigger audits and penalties.

5. How UZIO Can Help?

At UZIO, we understand the challenges cannabis businesses face in offering compliant, competitive 401(k) plans—and we’re here to help simplify the process.

1. Integrated Platform

UZIO (The 1st Payroll & HR System with AI at the Core) brings payroll, HR, benefits, and retirement plans under one roof. This means fewer vendors, easier compliance, and seamless data sync across systems.

2. Cannabis-Friendly Solutions

We work with providers who support the cannabis industry, helping you avoid last-minute terminations and giving your business a stable, scalable benefits infrastructure.

3. Hands-On Support

From provider transitions to employee education, our team helps you every step of the way to ensure your 401(k) offering is successful—for both your business and your people.

6. Final Thoughts

The shifting 401(k) landscape is a wake-up call—but it’s also an opportunity. Cannabis employers who act now can position themselves as responsible, future-ready businesses that truly invest in their teams.

Don’t let regulatory roadblocks slow you down. Let UZIO help you build a benefits package that attracts talent, builds trust, and secures your team’s future.

👉 Talk to our team today to see how easy it can be to bring a retirement plan back to your cannabis business—without the headaches.

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