Fintech Friday: 401(k) ‘Father’ Benna Joins Tech Firm
It’s a bit of a surprise. Ted Benna is joining a fintech.
The man who’s (literally) been in the 401(k) space since the beginning is embracing technology in a bid to help close the coverage gap.
For the one or two retirement plan advisors who don’t know, Benna first identified the 401(k) as a savings vehicle in the IRS tax code in the 1970s. It was the genesis of the private retirement savings system we know today, and he frequently discusses its impact since.
On Thursday, New York-based Salt Labs said Benna will join as a strategic advisor to help low-to-moderate-income and hourly workers participate in tax-advantage savings plans.
“I’ve been thinking about how to address the savings issue with hourly workers for a long time, since the 401(k) requires a salary reduction that lower-paid hourly workers simply can’t afford to put away each month,” Benna said in a statement. “When I heard about what Salt Labs was doing, I knew they were onto something. We need novel and modern solutions to solve for a pending retirement crisis, and Salt Labs has built just that for the most essential workers in our economy.”
Salt Labs Founder and CEO Jason Lee reached out to Benna to “workshop some ideas on Salt,” and the two bonded over what Lee said was their passion for helping improve the lives of everyday Americans.
“Ted has heard many ideas over the years, and this one was novel,” Lee said. “He’s known for a long time that the 401(k) is not a good option for low-income people, and he believes that Salt could help build wealth for this population as they continuously accumulate this new asset.”
Lee cited Goldman Sachs Global Investment Research when noting that the personal savings rate for the low-to-moderate-income segment is negative 2%, meaning 70% of the population consistently spends 102% of every paycheck, “leaving them with nothing substantial to show for their hard work.”
“The way the world currently works is that people are expected to receive a paycheck and take something out of that paycheck to put in a 401(k) or a savings account,” Lee explained. “Salt is effective in that it doesn’t reduce the size of an employee’s paycheck, and it’s extremely easy to understand.”
Salt claims to increase employee financial wellness and works like this: For every hour an employee works, they can earn one Salt, and their Salt Balance continuously grows over time, becoming “a unique store of value.”
As their Salt Balance grows, there’s an opportunity for the worker to exchange their Salt for something they value, such as a savings product or vacation, and 65% of all Salt users are setting long-term goals for their savings.
Instead of deducting from the employee’s paycheck for savings, like airline miles or hotel points, workers can only earn Salt by “spending their most important resource—their time.”
“Ted will be spending his time on our go-to-market strategy, which is aimed at employers who want to help their frontline workers save,” Lee concluded. “Ted sees his role as helping to get the word out by doing interviews like this.”
