Benefits August 24, 2023

Delta’s Emergency Savings Program Shows Retirement Security Dividends

Airline employees enrolled in an emergency savings program have also increased their 401(k) contributions.

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Delta Air Lines has enhanced an emergency savings program for eligible employees, reducing the requirements enrolled workers must meet to earn up to $1,000 to seed an emergency savings account.

The emergency savings program—launched in January—was enhanced in the second quarter to provide greater flexibility, explains Josh Jessup, Delta’s general manager of human resources.

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Changes to the program were approved during a mid-February presentation on the program to Delta CEO Ed Bastian, adds Jessup.

“Ed said, ‘We need to make the incentives available more quickly in the process,’” Jessup says. “The original design was three education segments that were each followed by a coaching session: education, coaching, education, coaching, education, coaching. Ed said, ‘That’s too much. We need to be able to get the incentive sooner.’”

In response, Jessup says, Delta “made some changes to front-load a little bit more education before the very first coaching session, and we made it so employees could receive their incentive after their first coaching session, instead of the three coaching sessions that are formally part of the program.”

The revisions also enabled Delta to “to try and streamline and simplify processes for employees a little bit,” he adds. The incentive is a $750 emergency savings contribution from the company.

Participants who contribute at least $250 in payroll deductions to their emergency savings account prior to completing the coaching requirement now have expedited access to both the $750 incentive and a $250 company match.

Delta designed and launched the program to provide a means for workers to save for financial emergencies, but also to improve workers’ retirement security.

“The educational aspects of this program are certainly having an impact, and that aligns with feedback that we’re getting from our employees as well,” Jessup says.

Several studies have shown a connection between workers’ retirement savings and access to emergency savings accounts. Employees with access to an emergency savings program are less likely to tap their 401(k) or retirement savings when they have a pressing or sudden financial need, according to research from Commonwealth and the Defined Contribution Institutional Investment Association.

“This can influence other financial areas like our 401(k) contributions in general and the number of people who would take loans [from the plan],” says Jessup. “Already we’ve seen great impact on employee contributions to their 401(k): … [more participants] in the program … have increased their 401(k) contributions than those who have not participated.”

Delta found that enrolled participants have increased their 401(k) deferrals: 23% of employees who completed the program have increased their 401(k) contribution percentage, as compared with just 10% of those who have not engaged in the program, according to a Delta representative.

Delta is now considering where in its workforce the program can be targeted to specific employee populations that may not participate at the same level as other cohorts, adds Jessup. Lower-wage employees will not be specifically targeted, he adds.

“We don’t see the emergency savings as an issue [solely] for lower-paid [workers],” Jessup says. “We see people who are [living] paycheck to paycheck at all levels of compensation.”

More than 45,000 workers have enrolled in the emergency savings program since it launched in January, 10s of millions of dollars have been contributed by enrolled participants and Delta has contributed more than $15 million through incentives, as of August 21, says Jessup.

“Our reservations division is an area where we have a high volume of newer employees and [an] area where we want to make sure that we’re making sure [workers are] familiar with our programs,” he says.

Delta hoped to achieve close to 20% participation in the program and for half of that group to receive the full $1,000 from the incentive and company match, he explains. “To date, we’ve had more like 45% of the population that has participated and, so far this year, 13% has earned the full $1,000, [and] about 15% has earned the $750.”

The emergency savings program is available to all U.S. employees below the director level—with at least six months of Delta service—including pilots. Participants can choose from three paths, based on their personal goals and finances, followed by individual coaching sessions from Fidelity Investments or Operation HOPE.

Data and Research August 23, 2023

Plan Sponsors in Higher Education, Health Care See Talent as Top Priority

Recruiting and retaining employees challenges plan sponsors, as employees are increasingly demanding more benefits and sources of guaranteed income, according to a TIAA survey. 

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A top concern for plan sponsors in higher education and health care is attracting and retaining employees, as the majority of employers said this was the primary reason they offer a retirement plan in the first place, according to the TIAA 2023 Plan Sponsor Survey. 

In fact, finding and keeping employees was ranked higher than “ensuring employees will have sufficient income in retirement” and “helping employees feel financially secure” when TIAA asked 326 plan sponsors—214 in higher education and 112 in health care—why they offer a retirement plan. 

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Ray Bellucci, head of recordkeeping and chief administrative officer of retirement solutions at TIAA, said in an emailed response that this suggests plan sponsors have a heightened awareness of the value their retirement plans hold when attracting and retaining talent. 

However, this poses a challenge for plan sponsors, as nearly half (48%) of current and prospective employees are looking for higher pay and expanded benefits. Many plan sponsors (45%) also said a top challenge for recruiting employees is that qualified candidates are asking for additional benefits that the institution cannot offer, such as “fringe benefits” like free lunches, unlimited vacation and student loan assistance. 

Bellucci said automatic features are extremely important when it comes to retaining the employees institutions need, including the custodial, janitorial and maintenance staff that are critical to higher education and health care organizations. 

“[Auto features] allow employees to automatically enroll in retirement benefits, maximizing what the plan has to offer while building savings at their pace, escalating as they’re able, so they can focus on their job, life or family,” Bellucci said. “Furthermore, we advise plan sponsors to discuss their retirement benefits with their employees early and often: during the recruiting stage, at hire, periodically throughout the year and during various life events. That way, they are more likely to understand the value of the retirement benefits offered by their employer.” 

Demand Increasing for Guaranteed Income 

When assessing employment opportunities, potential employees are seeking jobs that provide secure income, and they are considering potential access to guaranteed lifetime income options, TIAA found. Plan sponsors are recognizing this growing interest, and nearly one-third said they would consider offering or better promoting a retirement plan investment option that provides guaranteed income in retirement.  

LIMRA also predicted an “exponential increase” in the in-plan annuity market over the next two years and found that 14% of defined contribution plans currently offer lifetime income options. 

Bellucci argued that TIAA’s own default lifetime income solution, RetirePlus, has resulted in more than “250,000 individual participants now having access to guaranteed lifetime income within their accounts and is well on its way to 300,000 accounts, further illustrating the rising demand for lifetime income.” 

Meanwhile, many plan sponsors have been reluctant to incorporate in-plan annuities because retirement plan committees are overwhelmed with other benefits offerings and are concerned the plan could become stuck with a certain specific annuity selection, when it decides it wants to change providers.  

“Adopting in-plan annuities is not something that will happen overnight,” Bellucci wrote. “Plan sponsors are used to dealing with investment options, not annuities, and may not be familiar or comfortable with in-plan annuities yet. We view this as an educational opportunity, that income is the outcome for a retirement plan, as we continue to share the value of guaranteed lifetime income. Eventually, the success plan sponsors and participants are having with lifetime income services will penetrate the market. At some point in the future, we believe in-plan annuities will be as common as TDFs are today.” 

Seeking Support From Providers 

TIAA also found that plan sponsors are looking for support from plan providers to help engage employees in retirement planning and provide new and creative ways to help them differentiate their benefits in a competitive market.  

For example, 26% of plan sponsors said they would like their provider to offer more opportunities for participants to meet one-on-one (virtual or in person) with financial consultants, and 24% said they want their provider to increase communication with participants in times of market volatility. In addition, 21% of sponsors said they want their provider to offer increased support with fiduciary and compliance responsibilities.  

Employers are also looking for providers that can better engage deskless employees who work multiple shifts and need easy access to retirement planning information, as well as providers who send regular reminders for participants to revisit their deferral percentages and investment options, among other things.  

One-third of plan sponsors said they want their provider to make it easier for employees to understand their options and provide targeted communications that address considerations related to a participant’s particular financial stage. In general, plan sponsors feel retirement providers can help alleviate participants’ concerns and improve hiring and retention efforts.  

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