401(k) provider offers industry-first cash incentive to kickstart retirement savings

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Human Interest Inc. is tapping into a psychological phenomenon with its new incentive program aimed at increasing participation in its employer-sponsored retirement plans.

Incentive programs such as frequent flier miles or cash-back rewards on credit cards are frequently effective because people are drawn to opportunities to get a deal or earn a benefit for spending money on a certain product or with a particular brand. Dosh, a company that provides retail cash rewards, found that 82% of its users prioritize special promotions, discounts or cash back when choosing where they’ll shop. People have negative feelings about parting ways with their hard-earned money, and incentive programs can help create positive feelings to counteract that.

Human Interest will find out if its incentive program, which it says is the first of its kind in the industry, will be successful at pulling participants into its plans.

“Banks for years offered free toasters, to get people saving,” said Jeff Schneble, Human Interest CEO, in a statement. “We’re excited to be the first to see if this encourages people to save in their 401(k). Even if we get a few thousand people saving, it’s a few thousand people that will be on a better path than they were before.”

The 401(k) provider announced it will offer a 3% cash-back reward to first-time savers making at or below the U.S. median wage of $60,000 who begin saving in one of its plans. The company pointed to research that shows employees are significantly more concerned about their immediate financial commitments than saving for the long term, which has left up to 80% of employees with insufficient funds for retirement. By putting cash in their pockets to help address near-term financial stressors, Human Interest hopes employees will be willing to participate in a retirement savings plan.

To receive the incentive, employees must sign up for a Human Interest account before Jan. 1, 2024, and begin contributing at least 8% of their salary over a 12-month period. Once they’ve completed the term, they must complete a form attesting that they met the requirements and after verification, they will receive a gift card of between $100 and $250 via email. Participants are not required to remain in the plan after the 12-month requirement.

The ability to offer incentives is made possible by Section 113 of the SECURE 2.0 Act, which specifies that small financial incentives, not paid for with plan assets, may be given to participants contributing to a plan in the form of low-dollar gift cards, for example, to boost participation in workplace retirement plans, effective Jan. 1, 2023. Current law only allows employers to provide matching contributions as a long-term incentive for employees to contribute to a 401(k) plan.

“We see the urgent need for more working Americans to save for retirement,” said Schneble. “We are using the same rewards model that people enjoy in their daily lives, akin to cash-back credit cards, to encourage employees to actively save for a healthy retirement.”

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel.