Concerns about long-term financial well-being and retirement preparation have long been the primary focus of many employer financial benefit offerings. However, there is a growing need for a more holistic set of solutions to improve workers’ financial security.
Strict regulations have traditionally presented challenges for companies looking to expand employee financial benefits. That changed in recent years, thanks to the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, and the SECURE 2.0 Act, passed in 2022. With more than 100 provisions aimed at improving the financial well-being of For Americans, the two laws transformed and expanded the ability of companies to offer benefits that truly address the specific financial pressures of individual workers.
Employers in various industries should carefully consider which of these provisions make the most sense for their business and their employees. Most SECURE provisions are optional, leaving employers to understand which may have the greatest impact on the participant population and whether to introduce them as in- or out-of-plan benefits.
Several provisions are intended to help workers strengthen their personal financial safety net, which can allow them to start thinking about other, longer-term financial goals.
“Not having savings has the potential to not only hurt employees in terms of overall debt, but to make them vulnerable to things like bankruptcy due to unexpected expenses, especially medical debt,” says Charles Lattimer, head of innovation and development at FinFit. a provider of comprehensive employee financial wellness solutions.
For example, SECURE 2.0 makes it easy for employees to save for an emergency. Many workers don’t contribute to their 401(k) because they live paycheck to paycheck and worry that an unexpected expense could send them into debt. Under the new rules, employers can set up so-called “side-car” savings accounts in their benefit plans, contributing up to $2,500 through pre-tax salary deferrals. The automated nature of such savings accounts—along with the tax advantages—could incentivize some workers to jumpstart their savings.
The new rules also allow for self-certification of 401(k) hardship withdrawals, lowering the barrier for employees who may want to make such a withdrawal but feel uncomfortable sharing personal financial information with their employer.
Also, workers can now take up to $1,000 out of their 401(k) per calendar year through interest-free withdrawals, as long as they pay back the money within three years. This type of flexibility can encourage employees who want liquidity to feel comfortable locking away their money in a retirement account.
In some ways, Lattimer says, the new laws don’t go far enough for retirement savings because the benefits only help employees who already have the means to access affordable credit and non-retirement savings. To address this gap, FinFit offers a number of benefits aimed at helping close the holes. For example, a savings account for the unbanked population to provide workers with no-fee, direct-deposit bank accounts through which they can access cash days before payday.
Employers should exercise caution when making changes to any employee or pension plan offer. Start by setting goals for the new program or benefits, then implement changes that make the most sense for their population. As with any new benefits, employers must dedicate resources (or work with a provider who has resources) to communicate the changes to employees. Targeted communications should explain not only how the benefit is changing, but also why it might make sense for a particular employee.
Employers also have a duty to monitor ongoing engagement with any new program features to ensure participants are using it appropriately. If employees fail to participate in the new offer, employers should make the necessary changes that may improve outcomes.
“The biggest challenge in creating financial wellness programs is promoting something that is meaningful and relevant to those who need it. We’ve found that the most effective way to get someone’s attention to start a financial wellness journey, for those struggling financially or vulnerable, is to solve their short-term challenges today,” says Lattimer. “As you communicate the program, you also want to get feedback on the engagement side and evolve your approach accordingly.”
learn more about how FinFit can provide solutions for the financial well-being of truck drivers