PLANADVISER - Spring 2023 - 32

Viewpoints
Expanding the Adviser Remit
Sponsors and recordkeepers pursue inclusive financial wellness
ONE MAJOR shift for employers in the past
several years has been their increasing focus
on the financial wellness needs of a diverse
workforce. Foundationally, an inclusive financial
wellness strategy must offer tools to
help build emergency savings. Research has
shown that, in a diverse workforce, short-term
liquidity-i.e., emergency savings-is a critical
starting point from which workers may go on
to open a retirement plan account; at the same
time, it makes current plan participants less
likely to tap retirement savings in emergencies.
To keep up with industry pressure, understanding
the emergency savings landscape in
and out of the retirement plan is necessary for
all retirement plan advisers.
As employers innovate ideas for inclusive
financial wellness, plan advisers have an
opportunity to help them assess and choose,
develop and/or deploy benefit programs.
Advisers could bring an understanding of the
important role of emergency savings in overall
financial wellness and retirement wealth
building. They also could help employers think
inclusively by learning more about the unique
needs of employees earning a low or moderate
income so that emergency savings benefit
programs take account of these workers.
Emergency savings has become a common
topic within the retirement industry in recent
years. The passage of SECURE 2.0, which built
on the Setting Every Community Up for Retirement
Enhancement Act of 2019 and includes
two emergency savings provisions, has further
increased plan sponsor interest in this area.
One provision makes it possible for employers
to automatically enroll plan participants into
an emergency savings program in-plan and
provides employees with new ways to handle
unexpected expenses without penalty.
Our work with the Defined Contribution
Investment Association's RetireInstitutional
ment
Research Center, as part of BlackRock's
emergency savings initiative, further underscores
the important role that emergency
savings plays for participants earning a low
or moderate income. Those participants with
emergency funds were half as likely to take a
negative action on their retirement savings.
Designing in-plan emergency savings vehicles
that meet the needs of lower earners is a
powerful way to protect their plan accounts
from negative actions.
In our recent collaboration with UPS
and its retirement provider Voya Financial
through BlackRock's emergency savings
initiative, we used these principles to build
an emergency savings solution in the aftertax
option of the 401(k) plan. The program
resulted in $10 million in additional savings
for UPS employees.
However, not all workers who are eligible
participate in a retirement plan, and many
workers earning lower incomes don't qualify
for one at all. An inclusive emergency savings
benefit takes into account nonparticipants as
well. Through the BlackRock initiative, we've
piloted a number of innovative approaches
outside the retirement plan that advisers can
leverage in working with clients.
Emergency savings vehicles attached to
payroll have proven an effective place to
look when developing a savings benefit. In
Commonwealth's collaboration with ADP on
emergency savings features, we increased
savings to over $1.5 billion when adding
enhanced high-quality savings features.
Besides
reducing
negative
actions
on
retirement plans, emergency savings has the
potential to both increase participation in and
contributions to the plans. When advising
clients about financial wellness strategies,
it's crucial for plan advisers to have a strong
understanding of emergency savings in order
to take an approach that incorporates diverse
employee needs, especially those of employees
making no more than a moderate income.
Spurred by options available in SECURE
2.0, advisers can expand their view of emergency
savings with an approach that meets
the needs of nonparticipant and noneligible
employees and leverages proven tools such
as emergency savings features on payroll
cards and mobile apps. The adviser can help
sponsors build programs that contribute to
the short- and long-term financial wellness
of all of their employees.
Nick Maynard is a senior vice president at the national nonprofit Commonwealth,
where he has spent almost 15 years building, piloting and
scaling innovations to improve the lives of financially vulnerable people.
One provision
makes it
possible for
employers to
automatically
enroll plan
participants
into an
emergency
savings
program
in-plan ...
32 planadviser.com | Spring 2023 | Participants
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PLANADVISER - Spring 2023

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