How one 401(k) firm says it is bulking up amid the pandemic

An online 401(k) provider is striving for growth during the recession -- and part of its strategy is to eliminate all transaction fees.

Human Interest, which has raised more than $80 million in funding since its 2015 inception, according to data from Crunchbase, has been adding new clients during the pandemic and has pledged not to lay off any staff, CEO Jeff Schneble has said.

Tuesday, the plan provider announced that it had done away with charges for loan initiations and qualified domestic relations order distributions, along with numerous other types of transactional fees.

“There’s not another company in the industry that has gotten rid of them,” said Rakesh Mahajan, the firm's vice president of revenue. “The industry is making money on punitive charges to customers, and they aren’t necessary.”

Along with that change, the company this week rolled out two additional plan packages. Human Interest now has record-keeping packages with different service levels, with flat fees for the employer ranging from $120 per month plus $4 per employee to $150 per month plus $8 per employee. At the higher end, it serves as plan administrator and can provide dedicated account management, according to the firm.

There is also a $499 setup fee for some plans, according to the company’s website.

Employees are assessed fees totaling 50 basis points, in addition to fund costs, according to Human Interest. The record keeper has about 30 investment options available in its managed-accounts program, with fund fees ranging from 4 basis points to 67 bps, its site shows.

The company currently has more than 2,000 retirement plans in its book of business. About a quarter of them work with a financial adviser, Mahajan said, noting that the firm has relationships with about 300 RIAs.

“We are very adviser-friendly,” he said.

During the pandemic, Human Interest has had no problem taking on new clients -- it has had to keep hiring to meet demand, he said. Head count has at least tripled over 18 months, with the staff now at about 200, Mahajan said.

“We’ve definitely seen our best months ever,” he said. “Customers are saying, ‘I have to look at every dollar I’m spending. I need value for money.’”

As small and midsize companies restart their operations, some of them have sought to get the fiduciary and administrative burden of a retirement plan off their plate, Mahajan said.

Most of the plans Human Interest serves have 500 or fewer employees, he said.

“We love startup plans,” Mahajan said. “We can make money on plans with no assets, because we know they’re going to grow.”