PLANSPONSOR - February/March 2020 - 37

WELLNESS STRATEGIES
the employee's contributions may be withdrawn
free of taxes or penalties.
Plan sponsors will want to consult
with their counsel or plan adviser about
how offering such a solution in the plan
will affect nondiscrimination testing, as
non-Roth after-tax deferrals are included
in actual contribution percentage (ACP)
testing along with employer match
contributions.
Emergency savings alongside a DC
plan. Plan sponsors may also offer a Roth
individual retirement account (IRA) that
participants may contribute to, separately
from the DC plan. These accounts are
owned by workers participating in an
employer-sponsored plan and are essentially
attached to and offered through
it. The account retains the character of
an IRA but can have economies of scale
through commingled investment with
the employer plan, which is potentially
cheaper for participants.
Recordkeeper-provided solutions.
Many recordkeepers offer an emergency
savings account solution as part of their
financial wellness programs. For example:
* John Hancock's wellness solution
is available to participants of plan sponsor
clients. Once a savings goal is entered, the
participant links his checking account
and sets up recurring deposits.
* If the sponsor of their MassMutual
DC plan participates in that company's
MapMyFinances financial wellness tool,
participants may sign up for an account
administered by Millennium Trust Co.
The account requires a minimum deposit
of $25 per month and is FDIC-insured and
taxable. The maximum amount participants
may accumulate is $250,000.
Non-recordkeeper solutions. Sponsors
may also choose from non-recordkeeper
products to offer help to their participants.
For example:
* Businessolver, a provider of SaaSbased
benefits administration technology
and services, offers Goal Accounts (GA), a
product in the MyChoice Accounts suite
of solutions. Employees elect and manage
GAs within the Benefitsolver employee
benefits platform. The solution automatically
deducts funds from the person's
paycheck, after taxes, and deposits them
into an account in an amount he has
specified. Funds are available any time,
without penalty, via a debit card or electronic
transfer.
* SafetyNet offers a benefit called
Cookie Jar, structured as an employersponsored
financial wellness program
linked to an emergency savings account.
The program rounds debit card purchases
and checking account transactions to the
nearest dollar and stores the change in the
employee's Cookie Jar savings account,
the firm says. According to SafetyNet,
employers may also match the roundingup
amount, and employees may withdraw
funds at any time with no penalty or fee.
Emergency Savings in
The Savings Hierarchy
The rule of thumb, according to sources
in the financial industry, is to put three
to six months of salary into an emergency
savings account. At the same time, the
retirement industry stresses that participants
should save at least enough to get
the full employer match in their retirement
plan. And, over the last several years,
workers have been urged to save in health
savings accounts (HSAs) to prepare for
health care expenses post-employment.
Added to this, many employees have
student loan debt, some are preparing to
send their children to college, and some
take care of both children and aging
parents.
" We're asking for much from individuals,
and they can afford only so much, "
Verzella says. " And different people have
different abilities for what they can afford. "
Whether someone should build
up emergency savings first or save for
emergencies and retirement simultaneously
depends on the person's particular
circumstances, he says. For instance, if
a younger participant has no family or
mortgage, he could presumably save more
than someone who does. Age is not the
only variable, Verzella stresses.
He notes that MassMutual's MapMyFinances
financial wellness program, a
workplace financial and benefits planning
tool, was designed based on the
premise that most people have too little
money for all savings decisions. " It's a
central ecosystem for HSAs, student loan
help, emergency savings, etcetera, all in
one place. It offers personalized guidance
about how to save, and participants
can take action there, " Verzella says.
Murphy says the issue of balancing
short-term with long-term goals comes
down to budgeting and financial planning.
" The thing important to state is
that people have a general knowledge of
what they should do; it's just that they get
overwhelmed with how to balance it all, "
he says. " We live in a this-or-that society.
But the various financial needs that seem
to be competing are really complementary,
with different time frames. Helping
people understand that and feel better
about the actions they can take is central
to our financial wellness offering. "
He does note that sometimes participants
are encouraged to save for emergencies
before saving for retirement,
because it creates financial confidence
and reduces stress.
For good information on saving,
plan sponsors can turn to advisers, who
can be a big help to participants, Murphy
says. Sponsors can make them available
by phone, in group sessions and/or
in-person sessions. " We do lots of education
about establishing budgets, and
financial advisers are great resources. "
Verzella points out that, for emergency
savings, individuals can go into
any bank and open their own dedicated
savings account for emergencies, but this
takes extra steps and extra time, plus no
one tells them how much they need to save.
He cites a survey by the AARP Public
Policy Institute, which found that 71%
of employees indicated they would likely
contribute to an emergency savings fund
if their employer offered one.
-Rebecca Moore
PLANSPONSOR.COM February - March 2020 37
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