It’s been 45 years since the IRS introduced section 401(k) – spawning the birth of what is now a massive industry. The birth and growth of low-fee index ETFs have paved the way for millions to retire comfortably. Since then, not much has changed.

Robo advisors, plan personalization, and financial wellness content abound. All of these things help, but do they move the needle? Approximately $7.9 trillion of assets sit in 401(k) plans, yet little has changed to meaningfully improve employee participation and improve the standing of retirement planning for Americans more broadly.

What’s on the Horizon for 401(k) Plan Sponsors?

While the SECURE Act 2.0 will change the rate at which employees participate moving forward, companies with established plans still face a dilemma: either auto-enroll employees and incur additional headcount expense, or accept a low participation rate for a program that is costly to set up and maintain.

What If There Were a Better Option?

Our aim is to offer just that. Basic Capital for Employers offers a path to increasing an existing match by 5x without a commensurate increase in headcount-related overhead. It’s designed to be a win for employees, a win for talent-hungry HR leaders, and a win for CFOs looking to control costs.

While a 401(k) matching program is undoubtedly generous on the part of the plan sponsor, it’s understandable that a small percentage match may not sufficiently incentivize employees to think long term. Basic Capital changes that. It enables employers to contribute to a retirement mortgage on behalf of their employees, where each dollar contributed is matched with $4 in financing.

Let's Walk Through How This Works

This means, for example, an absolute dollar match of $5,000 for an employee (easy to imagine in a program offering a 50% match up to 6% on an employee with a $150,000 salary), would equate to $25,000 in Basic Capital.

This employee would be able to compound on a larger base using non-recourse financing, in a limited-liability retirement savings account.

Now, before getting too far into the details, you might have some questions:

• Is this ERISA compliant?

• Is the financing non-recourse?

• How are employees protected?

• Where does the financing come from?

We've built our product in partnership with leaders in ERISA compliance, we are SEC-registered, we're a fiduciary to sponsors and employees, and we're backed by leading investors committed to changing the role that retirement plans play for all parties.

We'd love to learn more about your program and share how we can help bring it into the future.