Empower to buy 4,300 retirement plans from Prudential in deal worth $3.55 billion – MarketWatch

Empower Retirement said Wednesday it agreed to acquire Prudential Investments’ full-service retirement business in a $3.55 billion deal, as the retirement plan administrator bolsters its portfolio of clients and accelerates its expansion.

With this transaction, which includes 4,300 retirement plans and 4 million participants, Empower now has 16 million clients across all major markets, including government, not-for-profit and profit businesses, said Ed Murphy, chief executive officer of Empower. The acquisition includes defined contribution, defined benefit, nonqualified and rollover individual retirement accounts, as well as Prudential’s PRU, +2.34% stable value and separate account investment products. 

“We are committed to helping Americans save for retirement,” he said in an interview with MarketWatch. “There are opportunities for us to expand and grow and build on that mission.” Prudential’s business was a “great fit” for Empower, he said. “We think we can deliver tremendous value to our participants, plan sponsors and now the 16 million people relying on us.” 

Workplace plans are a crucial way for Americans to save for retirement, even though only roughly half of Americans have access to one. Employer-sponsored plans, such as those Empower manages, allow workers to automatically and seamlessly put money away for their futures through their paychecks. State governments are attempting to mimic that structure with their own state-sponsored retirement plans, using investment vehicles similar to IRAs. 

Empower is familiar with acquisitions. Last year, the company announced it was buying MassMutual’s retirement business. In 2014, the merging of Great-West Financial and Putnam Investments with the acquisition of J.P. Morgan’s retirement business created Empower. 

Empower also purchased online financial planning firm Personal Capital in a $1 billion deal in 2020, and said it would use that technology to help its new retirement participants through the Prudential transaction.

This acquisition is just the latest in a trend across the retirement industry the past decade, said Drew Way, director of research for retirement at Corporate Insight. Given the slim margins in the recordkeeping space, companies must join forces to continue to grow.

These companies must also leverage tools to encourage comprehensive financial and retirement planning, Way said. You can tell participants they need to save at least 10% of their salaries for retirement, but “that doesn’t help with student and credit card debt,” he said. “Firms are trying to create a more holistic digital experience where their 401(k) plans are put in terms of their overall portfolio and once they’re in a more comfortable spot, then they can get them contributig more.”

Empower is doing just that with its digital platform as a result of its acquisition of Personal Capital, Way said. When clients log into the homepage, they see their retirement readiness and with Personal Capital’s technology, they’ll have more financial wellness content. “You also see things like budgeting tools that provide more of that overall holistic view as opposed to just a retirement focus,” Way said.

The deal is expected to close in the first quarter of 2022, at which point Prudential retirement plan participants will still access their accounts as they currently are. Closer to the transition, Empower will share a schedule for moving participants over to their platforms, but there will be “no disruption,” Murphy said.