Uber drivers are being given the opportunity to save for retirement.
The ride-hailing company announced today that drivers in several cities will be offered retirement plans through Betterment, an automated investment service. The deal, which has been in the works since this spring, will be offered first to drivers in Seattle, Boston, Chicago and New Jersey. Uber plans to eventually expand the program nationwide, and will offer drivers the opportunity to register for Betterment directly from the Uber app.
The announcement comes as Uber’s legal battle over whether it should categorize drivers as employees or independent contractors continues, and Uber tells TechCrunch that it designed the retirement savings feature based on driver feedback.
Last week, a San Francisco judge rejected the $100 million settlement Uber had reached with San Francisco and Massachusetts drivers over their employment categorization. Some drivers spoke out about the settlement, saying they were shortchanged, and U.S. District Judge Edward Chen appeared to agree — he called the settlement unfair for drivers.
However, Judge Chen’s interpretation of the law may push many drivers, who sued over the lack of reimbursement for expenses and notice before termination, out of the settlement. “It now seems very likely that the scope of this case may be drastically reduced to about 8,000 drivers,” the drivers’ attorney, Shannon Liss-Riordan, told The Wall Street Journal.
Retirement plans are typically part of an employment package. By offering the plans to drivers, Uber seems to be softening its strict stance that drivers are contractors. However, the plans won’t change drivers’ employment classification — Uber won’t match any of the funds drivers save through the plan, as employers traditionally do.
Betterment accounts will be free to Uber drivers for one year (the investment company usually charges a small fee to maintain an account) with no minimum balance. After the first year, drivers will have to pay a discounted fee of 0.25 percent on the amount in their account — for instance, if a driver saved $5,000, she would pay $12.50 to Betterment. If an individual quits driving for Uber, she can take her Betterment account with her.
Uber says the program is important because it will encourage the company’s 600,000 U.S.-based drivers to start saving if they haven’t already. “Nearly one–third of Americans have no retirement savings or pension. And research consistently shows that when people have access to a retirement account, they’re more likely to save than not,” Uber regional general manager Rachel Holt wrote in a blog post announcing the program.
A Betterment spokesperson said the company was uniquely positioned to win the contract with Uber because it has a strong mobile platform, in-app financial advice and low costs. Although Betterment hasn’t shared sign-up data, the company is prepared for 10,000 to 100,000 Uber drivers signing up per day.
Retirement plans aren’t entirely new to the gig economy. Lyft began offering a similar program to its drivers last year in partnership with another investment and savings startup, Honest Dollar. Lyft drivers pay a flat rate of $3 per month for the Honest Dollar retirement plans, regardless of how much — or little — they save. Lyft also helps connect drivers with health insurance, roadside assistance and other benefits.
Uber’s introduction of retirement plans earned some praise from Senator Mark Warner of Virginia, where the retirement plans have not yet been introduced. “Local and regional experimentation is crucial to developing a workable model for portable benefits,” Sen. Warner said in a statement. “I am encouraged that Uber is taking steps to be part of these conversations, and I look forward to continuing to engage with other on-demand companies and state and local leaders who want to be a part of this discussion.”
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