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Making retirement benefits more widely available

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Workers at organizations of all sizes should have access to affordable retirement benefits. So says Kristina Wallender, chief product officer of Human Interest, a San Francisco-based 401(k) and 403(b) provider catering to small and medium-sized employers.

Wallender shares how her firm is helping to make retirement benefits more widely available, as well as how employers — and policymakers — can increase access for all workers.

Katie Kuehner-Hebert: How has your company improved accessibility?

Kristina Wallender: Almost 80 percent of Americans are not saving enough for their retirement and almost half are not saving at all. Why? We found that the primary reason is because a majority of employees at small and medium-sized companies do not have access to employer-sponsored retirement plans. However, an AARP study has shown that people are 15 times more likely to save if they are offered a benefit like that.

Why aren’t more employers offering retirement benefits? For years, offerings were unaffordable in large part because providers’ legacy technology required manual processing by a lot of back-office staff, thereby making plans more expensive to administer, and subsequently, pricier for employers. The result: not enough people are saving enough for retirement, or even saving at all.

This is the problem that our company was founded to resolve. We’re focusing on people in all lines of work, helping them to have access to retirement benefits. Our goal is to make retirement benefits ubiquitous, by systematically removing barriers for both employers and employees — reducing costs and administrative burden, while increasing knowledge about the various retirement plan options.

Costs are reduced through the use of automated technology, as well as the elimination of fees, including transaction fees, distribution fees and rollover fees, as well as fees for plan sponsors to make amendments to their plans. Costs are further reduced by including low-cost index funds.

We’re curating portfolios that work for different investment strategies — they rebalance and shift to more conservative investments over time, and can be put on autopilot. We spent time building technology and automation that allows us to support plans more affordably. That way, more investment dollars can go toward investing for retirement.

We also take work off the plates of plan sponsors because we integrate with more than 100 payroll providers and we also support plans that run payroll in-house. Moreover, a lot of fiduciary services are also taken off plan sponsors’ plates by us providing knowledge about 401(k) and 403(b) plans. A big pillar of our offering is that plan sponsors don’t have to be experts — we provide simplicity, guidance, transparency and protection by offering fiduciary services to plan sponsors.

What should plan sponsors do in conjunction with this to get higher participation rates?

Plan sponsors really play a pivotal role here. The number one reason why is that employees typically first begin saving for their retirement when their employer offers a plan. That is step one — employers are more than halfway down the field when they do that.

Plan sponsors can then increase participation through both company matches and auto-enrollment. The decisions that plan sponsors make have a tremendous impact on whether or not employees participate and how much they personally contribute to their plans.

Tell me more about the federal mandate that has been outlined in SECURE Act 2.0, that would require companies with five or more employees to offer retirement plans –  and why you think it would be beneficial for workers.

The general conclusion was that SECURE Act 1.0 didn’t go far enough to improve access to a powerful retirement savings tool. This mandate is intended to solve the problem of not enough Americans saving for retirement, by making retirement plans more accessible. It’s a great step forward.

One aspect of the legislation is the requirement for employers to auto-enroll employees in their plans, which would make it easier for employees to participate because it would reduce their cognitive overload of having to make more choices in their day-to-day lives. This is where people can often get stuck: deciding whether or not to participate, not participating because they’re stuck deciding how much to start saving, what to invest in, or whether to use Roth or a traditional pre-tax option.

Employers can then kick it up a bit and talk to their workers about the importance of participating in their employer-sponsored plans. This can not only increase the financial well-being of employees, but it can also provide a broader social benefit to society.