Empower's latest deal moves into equity comp

One of country’s biggest retirement plan providers, Empower, is expanding into the equity compensation business.

The Greenwood, Colo.-based company today announced that it has purchased Plan Management Corporation, whose OptionTrax equity plan administration service represents $62 billion across 300 employers.

“It’s a complete end-to-end solution that would cover the needs of essentially all companies irrespective of the size or whether it’s public or private,” Empower CEO Edmund Murphy III said, noting that clients value the ability to view different account types and investments with a single provider. “Our vision is to create that integrated experience. If you’re interacting with Empower through the workplace … and you are also an equity holder, [you can have] the ability to see all of your holdings, all of your investments, in one place.”

In concert with the purchase, the company is adding an LLC, Empower Stock Plan Services, headed by executive VP for enterprise solutions David Gray.

Previously, Empower has provided access to its workplace plan clients to equity compensation options through third parties. The company is retaining those relationships and will not require clients already using services through them to switch, Murphy said. However, “we would lead with own capability with prospects going forward,” he said. It could also make sense for some prospects to go with third parties for equity compensation, even if they select Empower as their retirement plan provider, he said.

Equity compensation covers stock options, employee stock purchase plans, and restricted shares. Those are not covered by the Employee Retirement Income Security Act, so data are not reported to the Department of Labor, which makes estimates for the total size of the market difficult. However, publicly traded US companies have a total of about $2.7 trillion in equity compensation, according to CalcBench figures cited by Empower. The market has seen a compound annual growth rate of 17 percent since 2019, the firm noted. Separate data from Morgan Stanley in 2023 found that 40 percent of public company employees in the US are eligible for some type of equity compensation.

The OptionTrax business will be rebranded as OptionTrax by Empower, according to the firm. The employees at West Conshohocken, Penn.-based Plan Management Corporation are being retained, Murphy said.

“There is a high degree of domain expertise that we value,” he said, of the acquired firm’s workers.

Empower has about $1.6 trillion in assets under administration among 18 million people across its retirement and wealth businesses.

The company has made numerous acquisitions since it formed in 2014 as the result of combining retirement plan businesses from Great-West Financial, Putnam Investments, and J.P. Morgan. It’s parent, Power Corp. of Canada, has provided resource to help the company expand.

Earlier this year, Empower finished integrating the $314 billion plan business it acquired from Prudential, which followed purchases it made in recent years from Fifth Third, MassMutual, and Truist. In 2020, the firm bought Personal Capital, now Empower Personal Wealth, expanding into wealth management.

The firm is always considering potential deals that would help it fill out its expertise, add capabilities, and increase its scale. While it is focused on integrating the Personal Capital business on the wealth side, more acquisitions on the retirement plan side are possible, Murphy said.

“We think the market will continue to consolidate, so there’ll be more companies choosing to exit the defined-contribution workplace business,” he said. “More acquisitions are clearly in our future, but we will continue to be thoughtful about it.”