PLANSPONSOR - October/November 2019 - 4

Insights
Yes, They Can Save, but ...
R
ecently, I was speaking to someone about a topic that's
gotten a lot of discussion within the context of employee
benefits of late: sidecar savings accounts. When I use that
phrase, I actually mean any of three different options: a separate,
personal, emergency savings account within the 401(k) plan
that accepts employee after-tax contributions and is coordinated
with the plan's pretax contribution accounts; a savings account
attached to the 401(k) that uses a " deemed " or " sidecar " Roth
individual retirement account (IRA) as a separate emergency savings
account; or a savings account separate from the 401(k) that
uses a payroll or prepaid card-either being provided by a bank
or credit union-separate from and unrelated to any retirement
plan the employer might offer.
Now, the fact that I'm
Payroll
deferral is a
large part of
what makes
saving
successful.
using a term that might be
more specific to one of those
options, to, instead, refer to all
three, is admittedly confusing,
but it relates to that discussion
I began recounting above.
As I was commenting on
the value of now having these
options more available through
employer sponsorship and
via payroll deferral, I received
pushback. The pushback was mainly: Shouldn't we be telling plan
sponsors how they can educate plan participants about the importance
of emergency savings accounts, about how they should open
one outside of work and how much they should save in it-instead
of adding another employee benefit requirement?
My answer was, while it's true that anyone can set up
savings accounts on their own, the reality is that people don't
save in them. Payroll deferral is a large part of what makes saving
successful. And it reinforces the idea that the employer benefits
hub is a central part of employee well-being.
We've all heard the statistic for how many people-somewhere
around 40%-can't afford a $400 emergency expense.
I think that's somewhat incorrect-when you dig into the
numbers, you learn that people are responding to whether they
can pay for it with cash. I think people generally figure out how
to pay for these expenses, using credit cards or borrowing money,
but if we go back to the issue, they might not have the cash on
hand to cover them; therefore, informing them how to save that
money becomes important.
And as to why we're encouraging the employer to take on
more responsibilities-and don't you already have enough on
4 PLANSPONSOR.com October - November 2019
your plate?-yes, you have a ton on your plate and a lengthy
to-do list. But the role that the employer and workplace play in an
employee's life is so very important. Technology and individual
resourcefulness will not fill that role for many people. It's why
we're seeing so many new participant solutions offered through
retirement plan vendors, and why retirement plan advisers-who
for many years believed they only needed to offer services to plan
sponsors-are now developing workplace employee solutions.
At this year's PLANADVISER National Conference, a few
advisers agreed that inexpensive workplace financial planning
would be the next frontier for helping employees become financially
healthier. And I was reminded a few weeks ago that sometimes
it's just a matter of pointing out a benefit you already have
available, not asking you to get more or do more.
In early October, I moderated a panel discussion hosted by the
New York City chapter of the Women in Pensions Network (WIPN)
on the topic " Women and Investment Habits. " With three female
leaders in the finance sector, I discussed the shifting of investing
responsibilities within the traditional household-including why
women tend to shy away from investing-as well as technological
developments to encourage investing. Women shared personal
stories during the panel and networking session-and the event
ended with an exchange that, despite the emphasis on solutions
and apps available, only reinforced the importance of the employer.
A young woman in her late 20s or early 30s told us about
her trials getting on track and getting a budget together, even
though she was using all the recommended apps. What quite
literally ended our conversation was when one woman in the
audience offered something that had helped her considerably-
her company's Employee Assistance Program (EAP). This made
many of us wonder how many times, in discussions about financial
wellness and financial stress, have we noted that many of
you already have a service that can help your participants? After
all, EAPs are there to assist employees with problems, either
personal or work-related, that can harm their job performance,
health, and mental or emotional well-being. I'd say financial
stress fits the bill, wouldn't you?
As I write this column, a commercial is playing in front of
me that promotes yet another financial app. It's telling people
" [you can] invest anywhere, wherever you are, even on the bus. "
Yes, they can. But they don't. The vast majority of Americans
who save and invest do so in their workplace financial plan. Your
role in the success of American workers can never be underestimated-and
despite all the talk about the rise of the gig economy,
you will be extremely difficult to replicate.
-Alison Cooke Mintzer, Editor-in-Chief
http://www.plansponsordigital.com/plansponsor/october-november_2019/TrackLink.action?pageName=4&exitLink=http%3A%2F%2FPLANSPONSOR.com
PLANSPONSOR - October/November 2019

Table of Contents for the Digital Edition of PLANSPONSOR - October/November 2019
