Goldman Sachs has agreed to acquire Honest Dollar, an Austin, Texas-based startup launched in 2015 that helps small businesses set up SIMPLE IRA, SEP IRA, or basic IRA contribution plans.
On its website, Honest Dollar markets itself as a cheaper alternative than sponsoring a 401(k) plan. The platform helps sponsors automate enrollment into IRAs built on low-cost exchange traded fund investment options.
Goldman Sachs is marketing the acquisition as part of the firm's effort "to serve the approximately 45 million Americans who do not have access to employer-sponsored retirement plan," according to company release.
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SIMPLE IRA plans (Savings Incentive Match PLan for Employees) were created to incentivize small businesses with 100 or fewer employees to offer workplace retirement plans. Designed as a cost-effective alternative, sponsors of SIMPLE plans bear less administrative burden than 401(k) sponsors, and are not required to file annual Form 5500 or non-discrimination papers.
In order to qualify, sponsors can either contribute 2 percent of salary to all qualified employees, regardless of whether they choose to make their own deferrals, or a 3 percent match for those employees that do defer salary to the savings plan.
Participants are allowed to contribute up to $12,500 in 2016.
A SEP, or simplified employee pension plan, gives employers the option to offer workers with an IRA-based savings vehicle without the requirement of making employer contributions.
If sponsors do elect do contribute to a SEP plan, it may not exceed the lesser of 25 percent of the employee's compensation or $53,000. When contributions are made, they must be made to all eligible employees, in an equal proportion to each employee's salary.
Because sponsors of SIMPLE and SEP plans are not required to file Form 5500 papers, data on who widely the plans have been adopted is hard to come by.
Goldman's acquisition comes at a time of mounting attention to the issue of access to workplace retirement plans for workers at small companies.
The Obama Administration officially launched its myRA savings program last year, which allows small businesses to enroll employees in a savings program, with the sole option of investing in a new Treasury backed security.
And initiatives to create state-run IRA-based savings programs for small businesses continue to gain momentum, facilitated by the Department of Labor's accommodating guidance last year that would protect participating employers from conflicting with provisions in the Employee Retirement Income Security Act.
To date, four states have legislated state-sponsored programs have legislated state-sponsored programs into existence, with many more in the process of crafting options.
Neither Goldman Sachs nor Honest Dollar disclosed the terms of the deal, which is expected to close next quarter.
In an interview with CNBC, Honest Dollar founder and CEO William Hurley said he was "incredibly happy" with the outcome of the deal. In diverting interviewers' repeated efforts to get Hurley to disclose terms of the deal, he quipped that the company could now be named "Honest 'lots more of' Dollars."
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
