Client Service March 12, 2024

OneDigital’s AI Experiment: A ‘Cheppy’ for Everyone

The advisory created an artificial intelligence-powered version of a retirement plan adviser to show the technology’s potential—while making it clear human advisers remain the top talent.

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Jason Chepenik is getting smarter with age. At least, the artificial intelligence version of him is.

Chepenik’s avatar, called Cheppy, was created by OneDigital last year and rolled out as an experiment at the advisory firm’s annual conference. Like all AI, Cheppy will evolve with use.

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Cheppy talks to Jason Chepenik and a colleague at OneDigital’s conference.

“I’m going to get smarter and smarter—the virtual me. And I’ll never eat,” jokes the human Chepenik, a senior vice president of retirement and wealth with OneDigital. “But the real version is the opposite.”

OneDigital, like many in the financial services and benefits space, is experimenting with the possibilities of AI. Last Wednesday, Mercer, a business of Marsh McLennan, released a global trends study finding that “redesigning work to incorporate AI and automation” is among the top five trends for HR leaders in 2024.

At OneDigital’s annual conference in February 2024, attendees were presented with Jason Chepenik on a large screen live via a video link—or so they thought. The Cheppy AI would often respond to them as an avatar, identifying itself as AI. Once attendees realized the setup, they were encouraged to ask questions a plan sponsor or participant might ask, ranging from 401(k) administration to health savings accounts, according to Chepenik.

“We introduced this as a way to show our teams how AI and innovative ideas can apply within the industries that OneDigital is in, be creative, have fun, and we can change the world by doing it,” he says.

Chepenik, who has often used fun to draw people into retirement planning and savings, had the idea of a virtual adviser years ago when he saw holograms being used in real-world examples. But the idea came to life through the recent explosion in AI.  

“You’re not just getting a chatbot to respond, but you’re looking at and seeing what is a real image of a person who’s responding based on the question asked, in my actual voice,” he says. “We all have challenges in our industry with different languages, and we’ve got challenges with on-demand. You can’t just do a webinar or a recorded webcast. With the majority of companies leveraging AI in some way today, this is just one example of how we’re expirementing with technology to determine how we can serve our clients as effectively as possible without comprimising the human element that is so valuable—especially in financial services.”

Still Human

Cheppy at OneDigital’s conference.

OneDigital and Chepenik made it clear they are not going to be rolling out virtual advisers to plan sponsors or participants any day soon. Rather, says Vinay Gidwaney, OneDigital’s chief product officer, the Cheppy experiment is a flashier example of many projects OneDigital is working on to leverage AI.

“We, as a firm, have decided to lean in on AI and build our own tools and experiment with these things and start to drive value with this technology,” he says. “Other areas [beyond Cheppy AI] are more focused on using the technology to super-power our people,” he says.

That may be automating processes such as reviewing and analyzing millions of insurance documents. It may be deploying large language models to help client-facing employees. Another place may be creating first drafts of common forms, such as requests for proposal, that humans will then refine or helping advisers stay up to date on regulations or compliance issues.

“This is not about replacing our client-facing folks,” Gidwaney says. “These are all things that we are working on to amplify the impact our teams can deliver for our clients, and the industry at large.”

Avatars like Cheppy, Gidwaney believes, may be more useful in video trainings that can be personalized or educational videos for employers on 401(k) plans and administration. He does not see avatars as a solution to personalized advice that, in the end, he believes requires an actual human touch.

“We’re in a very complex area, and people need real advice,” he says. “More importantly, they need a person who can help guide them in these financial challenges and life challenges.”

Chep At It

Cheppy—a childhood nickname of Chepenik—is a hopeful sign of what can be done with AI in the retirement realm, notes the human Chepenik. He says participant questions often do start with basics that can be answered in a personalized way with the appropriate inputs. These might be questions about how much to save, whether to convert savings into a Roth account, or how to deal with credit issues.

“There are some basic things that you can give an answer on that is not full investment advice,” Chepenik says.

To create Cheppy, the adviser went into a studio and filmed four 10-minute videos for his image; the voice imprint then came from a 30-minute podcast he had done. He notes that the technology could be used for other plan advisers, or even HR members or executives at a company.

Whatever the use case, it is an area Chepenik says he is going to be thinking about and experimenting with to help improve retirement plans and outcomes for clients, while making them laugh—ideally—along the way.

“There’s lots of ways to do it, and we were able to test it out,” he says. “Half the room thought it was real—they thought it was really me talking. It’s wild.”

Compliance March 11, 2024

Biden Budget Would Eliminate Backdoor Roth Conversions, Consider Tax Change to Bolster Social Security

The reform would raise $23.7 billion over 10 years, according to the Department of the Treasury.

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President Joe Biden introduced his budget proposal for fiscal 2025 on Monday, addressing areas including tax increases, Social Security and Medicare. The proposal included several changes that would potentially increase taxes on wealthier people to support benefit programs.

Tax Increases

The budget proposal includes reforming “tax-preferred retirement incentives to ensure that the ultrawealthy cannot use these incentives to amass tax-free fortunes.” This is likely a reference to mega backdoor Roth conversions, in which a saver can convert 401(k) investments into a Roth individual retirement account or Roth 401(k) if the feature as available.

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A budget table published by the Department of the Treasury noted the proposal would “prevent excessive accumulations by high-income taxpayers in tax-favored retirement accounts and make other reforms.” It estimated that the proposal would generate almost $7 billion in tax revenue in 2025, $23.7 billion over 10 years.

The president’s budget would also eliminate the carried interest loophole, which, according to the proposal, “allows wealthy investment managers to pay a 20 percent rate on the pay they receive for managing fund assets, instead of the current 37 percent rate that comparable wage earners pay.”

Taxing carried interest as income rather than as capital gains would raise about $6.5 billion over 10 years, according to the Treasury’s budget table.

The budget also calls for the stock buyback tax to be increased to 4% from 1% in what the administration called a “surge in corporate stock buybacks” after tax cuts made during the administration of former President Donald Trump. The proposal would also raise the minimum income tax for billionaires to 25%, up from what the Biden administration claims is an average tax rate of 8%, according to the administration, after tax preferences—that number is based on a hypothetical situation in which unrealized stock market gains were taxed each year, rather than only being taxed when the stock is sold.

Meanwhile, large corporations would pay more as well, with the corporate tax rate going up to 28%, while setting a minimum of 21% for billion-dollar companies in income taxes.

“President Biden believes large corporations should pay their fair share and is committed to reversing the massive tax giveaway to big corporations that Republicans enacted in 2017,” the administration wrote.

 

Social Security

The budget proposal stated that “The President opposes any proposal to cut benefits, as well as proposals to privatize Social Security” and proposed a 9% increase to the Social Security Administration’s operating budget so the agency can improve its customer service.

The Biden administration also suggested that the president might support increasing or even removing the cap on income subject to Federal Insurance Contributions Act taxes—currently $168,600—to help fund Social Security, though the proposal does not explicitly say this: “Currently, middle-class and lower-income Americans pay Social Security taxes on all of their earnings, but higher-income Americans do not. That’s not fair. The President believes that protecting Social Security should start with asking the highest-income Americans to pay their fair share.”

The budget tees up a debate about Social Security funding and administration during the presidential election in 2024. On Monday, presumptive Republican nominee Trump was asked how he would handle Social Security, Medicare and Medicaid on CNBC’s Squawk Box. He responded that, “there is a lot you can do in terms of entitlements in terms of cutting and in terms of also the theft and the bad management of entitlements—tremendous bad management of entitlements.”

The former president added that, when it comes to the Biden administration, “I know that they’re going to end up weakening Social Security, because the country is weak.”

Biden later responded on a social media post on X, the platform formerly known as Twitter: “not on my watch,” in reference to the remarks about cuts to Social Security. 

Medicare

The administration is also seeking tax increases to help fund Medicare.

The budget proposal would “modestly increase the Medicare tax rate on income above $400,000,” the administration wrote.

It would also seek to close “loopholes” for high-paid professionals and wealthy business owners to avoid the tax, and it would direct all Medicare tax revenue into the Medicare Hospital Insurance Trust Fund, with the goal of extending “the life of the Medicare HI Trust Fund,” the administration wrote.

The plan is before Congress, but unlikely to get any movement, particularly in the Republican-controlled House, which will offer its own spending plans for 2025. Meanwhile, the government will need to work through spending needs for the current year, as a continuing resolution is set to expire on March 22.

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