Cash-back reward 401(k) system builds retirement savings

It's a system that's worked wonders for credit card holders - but would a cash-back rewards scheme make it easier for participants to add to their 401(k) balances as well?

The new SaverNation program might seek to do just that, setting up a system where participants would see a percentage of their daily consumer expenditures automatically go towards their 401(k) savings plans.

If it were implemented, it might provide a long-awaited way for participants to make serious strides in their retirement savings, without having to gamble on deferring a portion of their paycheck, especially with continued financial troubles.

According to the National Association of Plan Advisors, the system, created by Marc Robinson, took about seven years to develop and test, working with a variety of key players in the pension, payroll and credit industries.

But the result is a program that allows participants to significantly increase their retirement plan contributions simply through their regular daily purchases.

Under the SaverNation plan, employees would be able to get retirement savings cash back on purchases made at more than 500 merchants' websites.

Participants could take part by logging onto a centralized SaverNation website and making the purchases, which would then pass from 1 percent to 25 percent of the cost back into their retirement account. Multiple or repeat purchases would only end up feeding more cash into their accounts.

The system is already being used by investment managers across the country, who've been able to use the simple nature and easy logic of SaverNation's retirement savings benefits to offer as an add-on to employee systems.

"Here's an easy way for employers to improve their employees' financial lives," said ERISA attorney Ary Rosenbaum, who's included the system as an automatic feature of the open MEPs he's been sponsoring in Florida.

"It also offers real value to sponsors. For example, encouraging the rank and file to get in the habit of saving while they spend can directly lead to higher annual contribution limits for highly compensated employees in plans failing testing."

The system has also received the endorsement of ASPPA's Brian Graff, an advisory board member for the SaverNation plan.

"In an era of cutbacks and freezes, SaverNation provides a no-fee way to provide real value to employers," he said. "I encourage everyone to try it, because it really works."

TPAs who've offered SaverNation as an add-on say it has helped attract advisors as it can help provide more competitive plans that are almost immediately more enticing to participants.   


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