There’s another new Emergency Savings Account solution hitting the market.
HSA Bank, a division of Webster Bank, N.A., announced today that it will offer an ESA solution, an employer-sponsored benefit to help defined contribution (DC) employees save for unexpected expenses.
According to a recent survey from Webster Bank, a majority of Americans (57%) say saving for emergencies is a top financial priority. But nearly one-third (31%) do not have an emergency fund. Additional research from PwC found that financially stressed employees are twice as likely to be looking for a new job.
These new consumer-owned bank accounts use automation and behavioral science to create incentive employer programs that encourage employees to build emergency savings. Funds are accessible whenever they are needed and have no restrictions to what they can be spent on. As an after-tax funded account, employers can offer optional incentives like signup, matching and milestone bonuses.
“Financial wellness is one of the fastest growing areas of focus for employers and ESAs are a critical part of financial planning alongside retirement and healthcare spending.”
Chad Wilkins, President of HSA Bank
Since an ESA is a non-ERISA plan, it can be added at any time throughout the plan year and can be made available to all employees regardless of number of hours worked or enrollment in other benefits.
“Financial wellness is one of the fastest growing areas of focus for employers and ESAs are a critical part of financial planning alongside retirement and healthcare spending,” said Chad Wilkins, President of HSA Bank. “This new offering continues to expand HSA Bank’s product suite to ensure we’re helping employers retain and attract new talent.”
ESAs have been in the spotlight a lot lately, thanks in large part a provision in SECURE 2.0 that amended ERISA to authorize the establishment of pension-linked emergency savings accounts. The short-term savings accounts are established and maintained as part of an individual’s retirement savings plan, such as a 401(k) plan.
Employers may automatically enroll their employees into PLESAs, make employee contributions to the PLESAs through payroll deductions and make matching employer contributions to the linked retirement plans. Participating employees can easily withdraw funds saved in their PLESA without the penalties of drawing from retirement savings. Employers may set a limit of up to $2,500 for contributions. The PLESA feature is available for plan years beginning after Dec. 31, 2023.
HSA Bank research finds ESAs have a 59% average adoption rate, and participants save an average of $400 within four months and $1,000 after a year. Further, 50% of participants log in each month, and 89% of funds stay in savings. More information on ESAs is available here.
SEE ALSO:
• Employers See Positive Returns When Offering Emergency Savings Benefits
• EBSA Issues FAQ Guidance for Emergency Savings Accounts
• IRS Issues Guidance for Plan Sponsors Setting Up Emergency Savings Accounts Under SECURE 2.0
• HSA Bank Introduces Tuition Reimbursement Solution
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.