Deals and People July 28, 2023

Vestwell Acquires Student Loan Benefits Firm Gradifi from Morgan Stanley

The move adds student loan related tools such as employee payment management and debt refinancing to the digital 401(k) providers platform.

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Small business and individual 401(k) provider Vestwell announced Friday it has agreed to acquire Gradifi Solutions, a student loan benefits provider, from Morgan Stanley.

The acquisition will add new student loan-related offerings to Vestwell’s platform, including programs to help employees manage and pay down student debt, contribute to education savings accounts and refinance student loans, according to the New York-based firm. Morgan Stanley inherited Gradifi when it acquired E*Trade Financial in 2020.

Gradifi provides participants with workplace education solutions, including financial literacy and student loan refinancing tools, as well as student loan repayment programs. Terms of the deal were not disclosed.

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“As millions of Americans carry student loan debt, it’s essential for employers to provide accessible tools and programs that enable individuals to pay down their student debt while saving for retirement simultaneously,” Aaron Schumm, founder and CEO of Vestwell, said in a statement. “Bringing Gradifi Solutions into Vestwell accelerates our product roadmap initiative alongside a top-tier client base. Through this acquisition, Vestwell is realizing its vision of enabling all savings in the workplace and beyond, with more offerings coming soon.” 

Vestwell’s announcement pointed out that, with the passage of the SECURE 2.0 Act of 2022, an employer can recognize an employee’s student loan payments as part of its retirement plan matching formula. That policy does not go into effect until 2024, with many experts predicting it will likely take longer for many plan sponsors to start implementing it.

Morgan Stanley expressed its support for the deal, as it is also building its workplace capabilities and offerings through Morgan Stanley at Work.

“We’ve partnered with Vestwell for white label recordkeeping, and we’re thrilled to extend that relationship through their acquisition of Gradifi,” Brian McDonald, head of Morgan Stanley at Work, said in a statement. “We look forward to bringing our clients and participants a more robust and comprehensive education savings offering as part of this deal.”

A federal student loan forgiveness program backed by the administration of President Joe Biden was cancelled earlier this year after a Supreme Court ruling that the program was unconstitutional.

Administration July 28, 2023

Voya Financial Launches 403(b) PEP

Beginning August 1, Voya will bring what it is calling the very first pooled employer plan to employees of large nonprofits and other 501(c)(3) tax-qualified entities across the country.

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Voya Financial announced it will be the recordkeeper of what it is calling the first 403(b) pooled employer plan, expanding employee access to retirement plan benefits at nonprofits.

Voya designed the Secure Retirement 403(b) PEP to provide a pooled plan option for nonprofit organizations in charitable, religious, scientific, educational and literary fields and health care-related entities to broaden retirement plan access for employees, according to the Windsor, Connecticut-based firm.

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Voya is “thrilled to enter the 403(b) market,” said Brodie Wood, senior vice president and national practice leader of health care, education and nonprofit markets, in a press release.

“With the combination of PEPs growing in prominence over the past few years and the opportunity to permit 403(b) plans to maintain a PEP, we see even greater opportunities to provide employees within education, health care and other tax-exempt entities with greater access to retirement savings capabilities, and ultimately providing an opportunity for improved outcomes,” he said.

The plan was created to take advantage of changes allowed by the SECURE 2.0 Act of 2022, according to Voya, and is the first 403(b) PEP after numerous offerings to private businesses with 401(k) plans. 

“They’ve got the scale to support such a program and should be able to price it competitively,” says Kelli Send, senior vice president of participant services at the Francis Investment Council. “We suspect this offering may appeal to small 403(b) plan sponsors looking for a simple turnkey solution.”

The new PEP was registered with the Department of Labor and Department of the Treasury, earlier this year, explains Terry Power, CEO of The Platinum 401k Inc.

“We have developed a solid relationship with Voya and a few other major national recordkeepers in the Pooled Employer Plan space,” Power wrote by email. “Voya is a major player in the 403(b) market, and we’re delighted to have them on board as our first 403(b) PEP recordkeeper.”

LeafHouse Financial contracted to serve as the 3(38) fiduciary investment manager to satisfy Employee Retirement Income Security Act rules, and Plan Compliance, an affiliate of The Platinum 401k, enrolled as the 3(16) plan administrator, according to the press release.  

The PEP is focused on existing ERISA 403(b) plans and is available to individual retirement plan advisers through Voya, Power explained.

“We view the 403(b) PEP market as an amazing opportunity for plan sponsors, advisers and, of course, 403(b) plan participants,” he wrote.

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