Digital plan providers see opportunity in state mandates
âThese are not cheap plans for the employee,â Mr. Merrill of SaveDay said. By marketing its 401 (k) plan, SaveDay is emphasizing the company’s flat annual fee of around 0.45%, which it charges participants. Employers pay nothing for the plan.
Other digital providers, on the other hand, typically charge employers a fixed monthly base fee, as well as a per attendee fee paid by the employer or attendee. They sometimes also charge a placement fee to the employer or member. Human Interest, for example, charges 0.5%, while Betterment charges 0.25%.
State plans, however, compare favorably to 401 (k) plans overall. On average, small 401 (k) pension plans with 100 members and $ 5 million in assets cost 1.2%, while large plans with 1,000 members and $ 50 million in assets cost 0.9. %, according to the latest edition of the 401 (k) Averages Book. .
âThe people who do the best job for us at SaveDay to bring us new clients are the States,â Mr. Merrill said, noting that employers dissatisfied with their state’s pension plan options have contacted SaveDay for information. .
In some cases, he said, employers said they unintentionally upset workers when they noticed their paychecks were reduced, due to the state’s automatic enrollment feature.
âWhen they see a change on their paycheck, even though they received emails and warnings, they didn’t always understand what was going on,â Mr. Merrill said.
SaveDay gives employers the choice to enroll employees in the plan rather than being automatically enrolled in the program like state default plans do.
With so many factors to consider, private sector plan providers are focusing their efforts on helping employers better understand their choices.
âWe want to make sure that we educate people in places that have these mandates about what’s going on,â said Eric Phillips, director of San Francisco-based financial partnerships in over $ 1 billion human interest. The digital archivist, for example, has created a learning center on their website to help employers understand the differences between state-run plans and those offered by Human Interest.
Betterment for Business also provides information in states that have plans through âtargeted campaigns for employersâ using the company’s blog, LinkedIn and other media, Ms. Carlisle said.
Ubiquity’s Parks, meanwhile, markets direct to employers as well as through strategic partnerships with payroll service providers, certified public accountants and other benefit providers who serve small businesses.
Plan providers report that interest in their plans has grown as they have increased their reach.
âWe’re seeing a much greater engagement from these employers as they consider options that make sense for their business,â said Ms. Carlisle.