A fintech is making it easy for small businesses to offer 401(k) retirement benefits

The Big Resignation has made recruiting and retaining employees a top priority. After health insurance, retirement is the second most frequently offered benefit to attract talent. State and city regulations are also driving more interest in 401(k) plans! More than a third of small businesses that do not currently offer 401(k) plans expect to do so within 12 months.

A 401(k) retirement plan is also a way to take care of the financial well-being of employees and provide a tax advantage to businesses and their employees. But older 401(k) providers avoid marketing to smaller businesses because the market isn’t very profitable. However, the vast majority of companies have fewer than 20 employees.

Penelope is a 401(k) platform that offers small businesses an affordable and easy-to-use way to provide retirement benefits. It helps small businesses meet the challenges of the Great Resignation. At the same time, its CEO and founder, Jean Smart, manages her own challenges.

Smart is a founding member of Chief, a private network of influential women leaders. She became a member of an advisory group made up of female founders and business executives who have similar interests and challenges and help each other solve problems. A founder of Smart’s peer group has already achieved unicorn status, a valuation of over $1 billion.

Smart had worked at companies like Citi, Charles Schwab and TD Ameritrade, and at the time, UBS. She has worked on institutional employee benefits, such as 401(k) plans, employee stock options, and financial wellness. Inspired by the female founders of her Chief Group, Smart began to develop her own business concept.

Smart, the daughter of Korean immigrants who own a grocery store and restaurant, saw how her parents sacrificed themselves to provide for their children and employees while neglecting to save for their retirement. Not saving made them vulnerable in their later years. “With one in four Americans having no retirement savings, my parents are an all-too-familiar story in the United States — equal parts inspiration and cautionary tale,” Smart said.

“I’m a Gen-Xer and I’ve heard all my life that we were going to run out of Social Security,” Smart said. For many Americans, Social Security is an essential source of retirement income. But his money is running out. Projections indicate that from 2034; the Social Security Administration will cut retirement benefits.

Smart’s personal and professional background made her think she was the right person to tackle this problem.

“I wanted to do something around fintech, education and inclusive capital,” Smart said. She wanted to dispel the idea that there was a get-rich-quick way. Regularly investing in a 401(k) was the way to build a nest egg for retirement. “The reality is that it takes generations to create wealth,” she sighed. “It doesn’t happen overnight, and people have to work 20, 30, 40 years before they have money to pass on. [to loved ones].” She wanted to create a way to set him and forget him.

Companies with fewer than 20 employees – the vast majority – of small businesses need help, Smart thought. Many of these businesses are owned by women, minorities and immigrants. The fintech has streamlined processes, allowed it to simplify paperwork and helped it reduce costs by using a self-service business model, making it affordable for small businesses to provide retirement benefits to their employees .

“It’s hard to simplify things,” Smart said. “There are 50-60,000 funds to choose from. We offer 10. The trade-off is that there is no customization.” Through a low-cost subscription model, Penelope’s technology platform automates employee investing, streamlines costs and paperwork, provides convenient employee savings tools, and offers choice of pension plans. Common Employers (PEP), traditional 401(k) plans and Solo 401(k) plans. )s.

Penelope is an intuitive cloud-based 401(k) platform, which in January . There are no 30-40 page documents filled with complicated jargon, and the content is short, to the point and uses plain English. People have different learning styles, so content is provided in text and FinTok videos.

Timing can be everything. More and more states and cities are requiring companies to pay retirement benefits. This is the case for California, Oregon, Illinois, Maryland, Colorado, Connecticut, New York, New Jersey, Virginia, Seattle and Maine. Rules and regulations vary depending on where your business operates.

“During the Great Resignation, we are all fighting to recruit the best,” Smart said. She relies on referrals and luckily she is well connected.

Its employees could undoubtedly make more money working in bigger companies as a startup. But Smart emphasizes the purpose of the business. “The fact that we’re mission-based is very appealing,” she said. “It really strikes a chord, not only with professionals in their 20s and 30s, but also in their 40s, 50s, and even 80-somethings. I have five generations working with me,” Smart said proudly.

She enlisted Ted Benna, widely known as the “father of the 401(k)”, as Penelope’s advisor. “I’ve helped many small businesses in my life, as well as running my own business, and for many of them the idea of ​​offering a 401(k) was out of reach, expensive and confusing, jargon-filled, and too time-consuming,” Benna said. “Penelope offers easier-to-understand, more economically logical plans for small businesses and startups.”

Going from a well-resourced mindset to a resource-constrained startup was a steep learning curve for Smart. “You’re working with a blank slate,” she said. “You make a lot of mistakes. You have to be open.” You need to be an agile leader, and there are ways to improve your adaptability. Once you have it, “it’s thrilling”.

Penelope successfully raised $2.1 million in a pre-seed fundraiser led by Slauson & Co. Other investors include Amplify LA, Black Jays and executives from Wells Fargo, Citigroup and US Bank. “Saving for retirement is an essential tool for creating wealth and financial equality,” said Austin Clements, managing partner at Slauson & Co. “Penelope is fundamentally changing the way small business owners and employees invest themselves, their families and their communities.”

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