OneDigital Offers 401(k) Solution by Principal to Small Business Clients

OneDigital advisers will use Simply Retirement by Principal, with the goal of streamlining the process of setting up a retirement plan for businesses with fewer than 100 employees.


OneDigital and Principal Financial Group are collaborating to offer a low-cost 401(k) solution for small businesses, Simply Retirement by Principal, to OneDigital clients.

Simply Retirement is designed for new plans offered by businesses with fewer than 100 employees. First announced by Principal in 2020, the solution aims to streamline setting up and managing a retirement plan, alleviating the administration burden and risk associated with payroll integration, data collection and investment selection, according to a joint announcement Tuesday.

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Clients will be able to work with OneDigital financial professionals via the Simply Retirement platform to design plans, make election decisions, sign required documents and view plan data. OneDigital is the first advisory firm Principal has collaborated with to offer Simply Retirement by Principal for small and midsize businesses, according to a spokesperson. 

“Studies show that insufficient workplace retirement options and low employee participation contribute to the lack of savings among many retiring Americans. In fact, only 42% of small businesses offer retirement benefits,” Julie Cape, executive vice president of client services, enterprise and select at OneDigital, said in a statement. “Simply Retirement by Principal will help remove complexities for small businesses and leverage the small business tax credits included in SECURE 2.0 to empower leaders to invest in their employees’ financial security.”

OneDigital and Principal’s partnership comes as more small businesses are set to offer workplace retirement plans, thanks to a combination of retirement plan incentives in the SECURE 2.0 Act of 2022 and state mandates to do so.

SECURE 2.0 offered increased tax credits to small businesses to encourage plan creation. Effective on January 1 of this year, the three-year startup tax credit increased to 100% of administrative costs, up from the previous 50%, with an annual maximum of $5,000, for employers with up to 50 employees.

“For years, Principal has valued our relationship with OneDigital to serve the employee benefits needs of small and midsize businesses,” Scott Boyd, Principal’s senior vice president for retirement and income solutions, said in a statement. “Expanding our relationship to include a 401(k) plan that leverages Simply Retirement by Principal is another example of our commitment to work with SMBs to support the growth of their businesses and the financial goals of their employees.”

Simply Retirement runs on Ubiquity Retirement + Savings’ recordkeeping platform, according to Principal’s website.

OneDigital has more than 75,000 employers offering workplace products and services, along with retirement and wealth management advice through OneDigital Investment Advisors.

Morningstar, Envestnet Partner on Personalized IRAs Targeting All Balance Sizes

The managed accounts service will be powered by fintech IRALogix and is aimed at IRA holders without an adviser.

Morningstar Investment Management LLC and Envestnet announced Monday a managed accounts service for Individual Retirement Accounts that is backed by IRALogix Inc. 

The new offering, available in the first quarter of 2024, is designed to provide savers with fund selection and portfolio-building from Envestnet with Morningstar’s managed accounts methodology, according to the announcement. The IRAs will have no minimum account size requirements, allowing those with low balances to have access to personalized service, says Jim Smith, global head of strategy for Morningstar Retirement. 

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“The initial launch thought was there’s a number of asset managers who have IRAs sitting on their platform,” says Smith. “They’ve been there for years, frankly. A lot of those are an old legacy system, so our first target was really those asset managers to say, ‘Hey, want to get off of a legacy system cost savings through our IRALogix?’ In most cases, cheaper share classes pass on to the participants and we can layer on advice on top of it.” 

The deal comes on the heels of other partnerships penned by IRALogix this year. In April, the firm partnered with Slavic 401(k) for an IRA rollover offering. In June, Marsh McLennan Agency, a subsidiary of insurance brokerage Marsh, launched an IRA with IRALogix without account balance minimums. 

With the latest offering, Morningstar Investment Management’s platform will create customized investment portfolios tailored to each account holder’s unique financial profile and circumstances, according to the announcement. The product actively manages these portfolios, adjusting the investment strategy as the individual’s financial situation and investment goals evolve. 

Matrix, a subsidiary of Broadridge Inc, will be responsible for custody services for the IRAs. Envestnet will provide the fund selection and model portfolio-building. 

“This service is a very powerful collaboration that we believe will give asset managers, broker-dealers, recordkeepers, and advisers options to shift the growing cost of administering their IRA programs to a private-labeled offering, while still retaining their existing revenue streams,” Sean Murray, head of Envestnet Workplace Solutions, said in a statement. 

Nearly 40% of U.S. households own an IRA, but the majority do not have an adviser in part due to having relatively low balances, according to Morningstar. The new IRA is designed to solve for that by leveraging Morningstar’s managed account setup that is currently being used by over 2 million participants in employer-sponsored retirement plans.
 

Smith says that, if an IRA holder does have an adviser, that person can remain involved with the investments. 

“If there’s an adviser involved, [the offering] is a way for them to essentially pass on end savings to that user. They can still, again, get reasonable compensation,” he says. “We can deliver on advice, giving them a more diversified portfolio, rebalancing or revisiting it, versus a lot of these [IRAs that] have probably been done years ago when the participant rolls it over and it hasn’t been revisited. If there’s an adviser involved, there’s now a systematic advice program put in place.” 

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