Captain401 to make managing 401(k) accounts easy for anyone

The concept of a 401(k) is foreign to anyone outside of the U.S. For those in the States, however, 401(k) accounts are a constant cause for concern.

Woman smiling putting money in pink piggy bank

Startup news today as Captain401, an automated provider of 401(k) accounts for startups and small businesses, raises some money to grow. First to the funding news: The company has closed a $3.5 million seed round. Investors include SoftTech VC, SV Angel, Y Combinator, CrunchFund, Dave Morin's Slow Ventures, Susa Ventures, FundersClub, Paul Buchheit (creator of Gmail), Justin Kan (co-founder of Twitch), Michael Seibel (co-founder of Twitch), Jared Friedman (co-founder of Scribd), Jacob Gibson (co-founder of NerdWallet), Greg Brockman (former CTO of Stripe) and Joe Montana (Hall of Fame quarterback).

Beyond the funding, however, it is important to understand what Captain401 is doing and why. There is a huge divide between 401(k) provision for employees of large businesses and those within small businesses. The scale that large organizations have means that delivering a 401(k) is difficult for small businesses to achieve -- they just don't have the scale to take the time and effort, and the attention of the large providers. With nearly $5 trillion in assets, 401(k)s are a standard employee benefit at large corporations and the most requested benefit after healthcare. In spite of this, only 14% of small businesses are able to offer a 401(k) due to the stacks of paperwork, manual administration and compliance headaches involved.

Step up Captain401, which allows companies to set up a 401(k) plan in a matter of minutes. Thereafter the ongoing administration of the plan is completely automated, including the importing of data from HR software such as Zenefits, Gusto and Intuit. Employers get to offer their employees a level of service, performance and choice that was previously unobtainable.

Captain401 allows businesses of any size -- even ones without an HR department -- to give employees the ability to plan for their futures and save on taxes with a 401(k). A shocking 70 million people in the United States work for companies that don't offer a 401(k) as a benefit.

"The retirement system today is screwing over working Americans," says Roger Lee, co-founder and CEO of Captain401. "Nearly half don't even have access to a 401(k), and the ones who do are in badly mismanaged accounts."

This is an important point. The average worker's 401(k) underperforms when compared to the 401(k) of a large enterprise employee -- lack of diversification, inappropriate risk and excessive fees all make individually managed plans suboptimal. Captain401, which has seen adoption with a number of tech companies including Buffer, Joyable and Y Combinator, claims over 90% employee participation among its customers.

In terms of how the investment part of the offering works, Captain401 uses index funds from leading companies like Vanguard as the basis of its investment portfolios, and as part of its service, all investments are held in a secure trust account by one of the nation's largest third-party custodians.

I like the "democratization" element in here -- giving the little people (or, more correctly, the employees of the little businesses) an edge is always a good thing.

Copyright © 2016 IDG Communications, Inc.

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