“These are not inexpensive plans to the employee,” SaveDay’s Mr. Merrill said. In marketing its 401(k) plan, SaveDay emphasizes the company’s all-in annual plan fee of about 0.45%, which it charges participants. Employers do not pay anything for the plan.
Other digital providers, in contrast, typically charge employers a fixed monthly base fee, along with per-participant fee paid by either the employer or participant. They sometimes also charge an investment fee to either the employer or participant. Human Interest, for instance, charges 0.5%, while Betterment charges 0.25%.
The state plans, however, compare favorably with 401(k) plans overall. On average, small 401(k) retirement plans with 100 participants and $5 million in assets cost 1.2%, while large plans with 1,000 participants and $50 million in assets cost 0.9%, according to the latest edition of the 401(k) Averages Book.
“The people who are doing the best job for us at SaveDay at bringing us new clients are the states,” Mr. Merrill said, noting that employers dissatisfied with their state’s retirement plan options have reached out to SaveDay for information.
In some instances, he said, employers reported having unwittingly upset workers when they noticed their reduced paychecks, a result of the automatic-enrollment feature of the state plans.
“When they see a change on their paycheck, even if they’ve received emails and warnings, they didn’t always understand what was happening,” Mr. Merrill said.
SaveDay gives employers the choice of having employees opt into the plan rather than be automatically enrolled in the program as the state plans do by default.
With so many factors to consider, private-sector plan providers are focusing their efforts on helping employers better understand their choices.
“We want to make sure that we’re educating people in places that have these mandates about what’s going on,” said Eric Phillips, the San Francisco-based director of financial partnerships at $1 billion-plus Human Interest. The digital record keeper, for example, created a learning center on its website to help employers understand the differences between state-run plans and those offered by Human Interest.
Betterment for Business, too, is providing information in states that have plans through “targeted campaigns for employers” using the company’s blog, LinkedIn and other media, Ms. Carlisle said.
Ubiquity’s Mr. Parks, meanwhile, is marketing directly to employers as well as through strategic partnerships with payroll providers, certified public accountants and other benefit providers that serve small businesses.
Plan providers report that interest in their plans has grown as they’ve bolstered their outreach.
“We’re seeing a lot more engagement from these employers as they’re thinking about what options make sense for their business,” Ms. Carlisle said.