Broadcast Retirement Network’s Jeffrey Snyder discusses implementing an emergency savings plan in your 401k (or 403b or 457b) retirement program with Commonwealth’s Nick Maynard and T. Rowe Price’s Rachel Weker.
Jeffrey Snyder, Broadcast Retirement Network
Rachel, Nick mentioned the EWD withdrawal and the PLESA, the PLESA, but that’s not the only options that are available. T. Rowe Price decided also to offer an out-of-plan solution. I like that it’s not one-size-fits-all, but can you tell us what the thinking was behind that?
Why offer multiple types of solutions?
Rachel Weker, T. Rowe Price
Yeah, at T. Rowe, we felt very strongly about the value of having multiple solutions available to our employers, recognizing that different employers are going to be interested in different solutions for different reasons. And as Nick has alluded to, I think realistically, their different financial needs are going to lend themselves to different types of ideal solutions. So having that variety was important to us.
And we see in our conversations with plan sponsors, in terms of the solutions that they gravitate to, plan sponsors who are more interested in the out-of-plan solution tend to appreciate some of the benefits in terms of absence of restriction on contributions. There are no restrictions on HCE usage, ease of access to the funds, access to a high yield interest investment as well. I already mentioned for plan sponsors interested in PLESA, really looking at the ability to tap into a known and trusted retirement solution, avoid any friction by being able to take advantage of that payroll deduction.
They also like the ability to have employer match and auto enrollment as a function of PLESA as well. So, there’s no one silver bullet, and we really feel that a suite of solutions is better for a plan sponsor to pick the solution that makes best sense for their workforce. Interestingly, we are seeing some manufacturing employers showing an openness to offering all three solutions, really emphasizing that flexibility and choice for their employees enables them to best address the diverse financial needs that they’re dealing with.
Jeffrey Snyder, Broadcast Retirement Network
And Nick, from your experience, Commonwealth experience, I mean, does that choice kind of carry through with maybe some of the other partners that are out in the industry offering a multitude of arrows in the quiver, so to speak?
Nick Maynard, Commonwealth
Yeah. So taking a step back to the Secure 2.0 and the other feature of the PLESA, it’s obviously newer and to, with our knowledge, T. Rowe Price is really the first record keeper to build it.
So we’re excited to see the early data and insights as they go live with clients, and we’re very excited to be working with them, with T. Rowe Price, who has joined the Emergency Savings Initiative that is funded by The BlackRock Foundation to better understand the implementation of PLESA and other emergency savings solutions that they offer, as Rachel has outlined.
We’ve already talked about how policy is adapting to record keeper feedback around the PLESA and the new bills by Senators Booker and Young, but there’s also a really cool element in Secure 2.0 that allows for auto enrollment into PLESA, which, as we’ve seen in the defined contribution sphere, has been critical to increasing retirement participation. The more often we create an opt-out environment, the better. We’re incredibly excited to see initial data insights as T. Rowe goes live with their clients, not only in terms of PLESA sidecar account participation and savings amounts, but, of course, the simultaneous impact on retirement participation, contribution, and leakage.
In terms of out-of-plan emergency savings, it’s great to hear Rachel’s comments about manufacturing employees. When we work with plan sponsors, Commonwealth always starts with research to understand the needs of the workforce, and the research always demonstrates a desire from employees for some form of workplace emergency savings. And it often uncovers very different preferences, so the notion of someone might need the $1,000 and that’s all they need to get through an emergency expense.
Another employee might value the relationship between retirement and emergency savings and having it very close together, so something like the PLESA might work very, very well. But there are other folks that don’t have access to the retirement plan who work for a company or who would like the emergency savings to be out-of-plan, as it’s called. All are supportive of retirement security, but it shows how complex the needs of different workers are and how wonderful it is that T. Rowe Price has these multiple solutions to offer their plan sponsors and meet those varying needs. So it’s really critical to look closely at offering a suite of solutions as an employee savings benefit, because again, we know that the tools work different for different workers and different households in the situations they might face.
Jeffrey Snyder, Broadcast Retirement Network
And, you know, Rachel, obviously there’s a suite of solutions, all clients are different, they’re unique. I always used to say that each retirement plan is its own ecosystem. For those watching the show, any advice about how you go about doing this?
I mean, it’s not one size fits all. There’s a lot of different solutions. You know, could you offer some advice out there?
Rachel Weker, T. Rowe Price
Yeah, I think really consistent with what Nick just mentioned, I would suggest start first with doing some research to understand what the unique needs of your population are. And it’s just been mentioned, there is no one silver bullet that is going to effectively address all of those diverse needs. So making sure they clearly understand what the needs are and what they’re looking to achieve with those.
The second piece I would suggest is really talking to the different service providers they might be working with to understand what options might be available to them. And then the third piece is once they have selected either the option or multiple options for their employee workforce, really be purposeful and diligent from a communication standpoint, communicate early and often. And we found, especially with the promotion of our PLESA solution, that when we, as well as the employer, together were communicating around availability and benefits of the solution, we saw increased engagement and usage.
We’ve been really happy with the reaction that we’ve seen for the clients who have launched specifically our PLESA solution. And I would suggest really being thoughtful about the different touch points and opportunities to communicate. Think about your annual enrollment opportunity, benefits, fares, employee meetings, and look to those as a way to generate some meaningful engagement and traction.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, Nick, Rachel hits on some really important points around a lot of important points, but communication, education, sound key for those looking to implement this. What’s it, you know, is it just about jumping in and starting?
Nick Maynard, Commonwealth
I think Rachel gives a good blueprint for how to approach it. It’s still a very large, unmet need in the workplace. And we have the recent national data at Commonwealth that, you know, a lot of workers would really like to have it as one of their top three workplace benefits.
With all the important caveats that communication and outreach to employees is still needed, it’s not a slam dunk to get folks to engage and take up and use a benefit. But that preference is there and that need is really there. And so a good place to start, as Rachel mentioned, is understanding workers’ needs and understanding what the background is and the use cases that might exist for the emergency savings.
And we’ve been able to do a number of pilot demonstrations in the real world through support of The BlackRock Foundation and the Emergency Savings Initiative. So there’s a lot of wealth of information to draw on from Commonwealth and that work to understand what has been seen and what the approaches to the tools and the marketing can be. And there’s a variety of models that might work for different companies at different times.
And Commonwealth’s always happy to be a resource to those interested and pointing folks in the right direction or collaborating more closely. We’re super excited to see this space grow and we’d really like to see high quality emergency savings benefits for all workers in the U.S. Yes, well, certainly I think there’s a lot of interest and sometimes you just need to jump in.
Jeffrey Snyder, Broadcast Retirement Network
It’s worth it to your employees. Nick, Rachel, so great to see you. Thanks for joining us.
We look forward to having you back on the program again very soon. Great to be here. Thank you.
