Lyft Retirement Program Could Be Model for Sharing Economy Benefits

A new program from one of the biggest drivers in the sharing game may offer something of a road map for business leaders, labor advocates and policy makers looking to make it easier for “gig” workers to get retirement and other benefits.

Earlier this month, ride-sharing operator Lyft announced a partnership with investment firm Honest Dollar to give drivers the opportunity to put some of their earnings away for retirement. The program is a limited version of the type of portable benefits system that a wide cross-section of folks have been calling for as a way to help sharing economy workers access things like health care benefits, workers compensation assistance, unemployment insurance, and paid leave.

“We feel like we’re providing to Lyft drivers the ability to have a retirement savings benefit that is arguably a better deal than what W-2 workers get,” Honest Dollar CEO Will Hurley told Bloomberg BNA Nov. 30. He said that’s because of the relatively low investment fees that come with the plans the company currently offers.

The plan doesn’t require Lyft to actually pay for some of its drivers’ retirement savings or to divert drivers’ earnings into a separate retirement fund. But it allows independent workers who might otherwise be priced out of most retirement plans to put some money away into four Vanguard-managed funds, Hurley said. The plan will cost drivers $1 to $3 per month, depending on when they sign up, plus management fees mostly ranging from 0.08 to 0.10 percent.

Lyft drivers and many other workers in the burgeoning “gig” and “sharing” economies are classified as independent contractors for tax and employment purposes. That means the companies don’t have to pick up the tab for health care, unemployment insurance benefits, and workers' compensation or offer overtime and minimum wages. It also means that the workers are on the hook for both the employer and the employee share of Social Security and Medicare taxes.

Benefits Going Portable

Many seem to think that a portable benefits system--in which a business and its contractors pay into accounts on a flexible, pro rata basis that reflects hours on the job, tasks performed or money earned for the employer--is the wave of the future for both sharing economy workers and independent contractors in more traditional fields.

Businesses aren’t likely to hop on board unless the legal framework is updated to allow them to offer some benefits without taking on the liability that comes with having to reclassify contractors as full-fledged employees. If that happens, Freelancers Union Executive Director Sara Horowitz and other worker advocates say. it should be a “social sector agent” like a nonprofit group or labor union that manages the money set aside so that the focus is on returning the investment to workers when they retire.

“I think that what we have to figure out is how do we come up with a system that lets employers contribute—and requires them to contribute—in the same way as employees,” Horowitz told Bloomberg BNA Nov. 17. “So, a real bona fide independent contractor can get benefits just like a bona fide employee.”

Still, Hurley says Honest Dollar can provide clients with a multiple-contribution, portable retirement system. The company is already managing similar systems for traditional businesses that classify their workers as employees. Although Honest Dollar doesn’t have any immediate plans to expand into other forms of benefits, Hurley said it’s likely to broaden the investment opportunities it offers to participating workers.

“For us--the way we designed our platform--it doesn’t matter how the employees are classified,” Hurley said.

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