I was thinking about my post from yesterday, Why DeFi Will Win: A 401k Migration Story, and then it further dawned on me that the concept of a 401k Plan administrator is going to become obsolete.

While a quick Google search did not immediately reveal how big the 401k administration industry is, I did find, naturally, a Top 10 list that someone had put together.

The list doesn’t really matter all that much, what matters to these companies (and I wonder if they know it yet) is that the concept of a 401k Plan Administrator (assuming the concept of the 401k plan continues) is going to become outdated.

Why?

Because a 401k Plan Administrator simply applies business rules (e.g. ‘how old is the contributor?” “how much money has been contributed to the plan? etc.) to an account.

All of these…and I do mean all of these, since they are rules that can be written as software code, ARE going to be written as software code.

Which means that one day, a 401k plan is a smart contract.

Each of us will have a vault/wallet that represents our entire portfolio. Then, we’ll have subvaults that have special rules associated with them, that either we program or that others program and we inherit.

One of those will be a 401k sub-vault. That sub-vault will monitor inflows and outflows. It will tag certain monies as “401k.”

And you’ll be able to pool it with non-401k assets.

So, for example, let’s say you want to buy $10,000 worth of a stock. You have $5k in a taxable account and $5k in a 401k account.

You’ll be able to merge those into a larger investment, with the tracking done automatically that half was from a 401k and half wasn’t. When you cash out, assuming you’ve made a profit, the distributions will be divided according to your original investment and either taxed or not.

All of this will happen on-ledger with smart contracts and, as a result, the drop in fees that all of us pay (one way or another) will be massive.

Everyone wins…except the incumbent plan administrators whose cost structures won’t be able to compete.

Remember that when the 401k plan administrator lobby begins its “save our industry” lobbying effort in DC.