Lee co-founded a company that makes it easier for small business to offer a 401k
As the staff of his startup company, PaperG, expanded from four co-founders to a team of more than 70 people, entrepreneur Roger Lee, A.B. ’08, decided to offer a 401k program as an attractive benefit for his hard-working employees.
“A 401k is one of those must-have, standard benefits that every serious company offers,” said Lee, who concentrated in applied math at the Harvard John A. Paulson School of Engineering and Applied Sciences. “I thought, naively, that I would be able to go online, click a few buttons and start a 401k for my company.”
After spending hours on the phone with several insurance companies, Lee learned that offering a 401k involves much more than a few mouse clicks—it requires tedious paperwork and ongoing data entry. His firm would have to enter and update employee information manually and then re-enter all payroll data into the 401k system every two weeks.
In the end, the administrative burden was too much for his small startup to handle, so he opted not to offer the benefit.
“I was ashamed that our company couldn’t offer a 401k. We couldn’t do something good for our employees for what seemed to be very preventable reasons,” he said.
Lee found himself in the same boat with many small business owners. The amount of administration is often overwhelming, especially for a startup that is fighting through its tumultuous first few years in business. That’s why, according to the U.S. Government Accountability Office, only 14 percent of businesses with fewer than 100 employees offer a retirement plan.
Rather than be discouraged, Lee decided to fix problem.
In July, Lee and co-founder Paul Sawaya, a former Mozilla employee, launched Human Interest, an online service that offers an automated, paperless system for 401k management. The system, which connects directly with a firm’s payroll provider, automates the tedious data entry process and handles the filing of legal forms, Lee explained.
Human Interest gives small businesses a simpler way to launch a 401k, but that step is only half the battle, Lee said. The Small Business Council of America reports that only 62 percent of employees who are offered a 401k make contributions, and 13 percent of employees are unaware that their firm even offers such a plan.
By providing an automated, online enrollment process for employees, Lee hopes that Human Interest will encourage more people to contribute to their retirement plans. Human Interest, is also an SEC registered investment advisor, providing personalized investment advice to help contributors choose the investments that fit their personal situation and tolerance for risk.
“People who try to invest on their own lose out on over 3 percent per year of investment returns,” Lee said. “We want to make this process easy and convenient for employees, as well as their employers.”
There is clearly a need for this type of service, as evidenced by the growing number of companies that have come onboard since Human Interest officially launched in July. Lee and his colleagues are currently hiring new employees and growing the business to meet increasing customer demand.
For Lee, Human Interest is about more than using technology to modernize the traditional 401k. He believes the company serves a larger social mission. As traditional pensions disappear and the future of social security remains unclear, many Americans could soon be facing a retirement crisis, he said.
“We see our mission as helping the average working person take care of their financial future,” Lee said. “The current types of services don’t fully reach the potential of what a 401k should be. We can use technology and a customer-centered approach to really help people plan for the future.”