According to a recent WSJ Article1, more employers are adding emergency savings accounts to employee benefit programs, in an effort to attract and retain workers and help them better prepare for unexpected expenses.
In 2019, The Federal Reserve reported that 37% of adults lack the funds to cover a $400 emergency. Nearly a quarter of the 11,000 respondents to a November 2020 Federal Reserve survey said they were worse off financially than a year before.
Responding to demand from employers, workplace programs designed to help workers build emergency savings, often through payroll deductions, are becoming exceedingly popular.
Thrive Flexible Matching offers a truly innovative approach to employer sponsored emergency savings program where employees can allocate their retirement matching dollars to their Retirement or Emergency Savings Account (or Student Loans and/or 529 Accounts). One of the reasons that the Thrive is such a game changer is that it doesn’t require adding to a company’s benefits budget, it utilizes already-budgeted dollars and empowers Employees to use it where they need it the most.
Regulators have been trying to make it easier for employers to automatically enroll workers into emergency savings accounts, something the 2006 Pension Protection Act did in 401(k) accounts.
Sen. Cory Booker (D., N.J.) introduced a bill to make it easier for employers to auto-enroll workers in emergency-savings accounts. (Workers would be able to opt out.) and a bill sponsored by Sens. James Lankford (R., Okla.) and Michael Bennet (D., Co.) would allow workers one penalty-free annual withdrawal of up to $1,000 from a retirement account for emergency expenses. However, with experts suggesting 3-6 months’ worth of expenses in emergency savings account, a $1,000 withdrawal most likely won’t cover the entire expense.
Sources
[1] The New Employer Benefit: Matching Emergency Savings Pandemic has highlighted need for employees to have money set aside for a rainy day, By Updated Aug. 27, 2021 8:12 am ET (https://www.wsj.com/articles/the-new-employer-benefit-matching-emergency-savings-11630065600)