New Workplace Savings Accounts Spotlight Need for Emergency Savings

This week, Transamerica announced the addition of emergency savings accounts to its suite of benefit services solutions.

The offering is being rolled out through new strategic relationships with Millennium Trust Company and SecureSave, and according to Transamerica’s leadership, the new offering will help employees save for unexpected events that may impact their ability to contribute to or preserve their workplace retirement savings account.

One recent report on the topic of emergency savings, put out by the Defined Contribution Institutional Investment Association, suggests there is an emerging consensus among retirement industry practitioners that emergency savings solutions should enable short-term savings with liquidity while also preserving long-term savings—so long as they are designed, implemented and communicated effectively. Most of the existing solutions highlighted in the DCIIA report offer a dedicated account distinct from retirement savings, hosted either outside the retirement plan as a standalone account or inside the plan in a separate account from the core retirement assets.

In explaining its motivation for developing the new emergency savings solution, Transamerica points to the most recent Federal Reserve report on the economic well-being of U.S. households. In the analysis, the Fed finds that only about two-thirds of adults would be able to cover an unexpected $400 expense by exclusively using cash, savings or a credit card that they could pay off at the following statement. Alarmingly, some 12% of adults feel they would be unable to pay the unexpected $400 expense “by any means.”

One of Transamerica’s new collaborators, Millennium Trust, has previously partnered with other national retirement providers on emergency savings solutions. The other, SecureSave, is a newer firm founded in direct response to what its founders call “the economic catastrophe that resulted from the COVID-19 pandemic.”

In adopting the emergency savings accounts, participating employers are able to choose whether to work with Millennium Trust or SecureSave, which take different approaches to delivering the accounts.  According to Transamerica, both providers deliver to employers “an easy way to offer and manage an emergency savings fund as a workplace benefit.” Transamerica says this multi-provider approach gives employers the ability to match their company’s needs with the best solution for their employees.

As the product announcement notes, the Transamerica emergency savings accounts enable employees to automatically save a portion of their regular paychecks in order to build an emergency savings fund. To incentivize employees to establish emergency savings accounts, employers have the option to contribute to employees’ accounts. Transamerica emergency savings offerings are FDIC-insured up to the standard maximum deposit insurance amount of $250,000.

“Employers realize that individual employees’ financial stress can impact productivity, retention and overall health significantly,” says Kent Callahan, CEO of Workplace Solutions at Transamerica. “Emergency savings programs can help alleviate sudden and unexpected needs for cash liquidity. We believe that people will be more willing to save for the long term in retirement plans if they already have a cushion to first meet household and emergency needs. Emergency savings accounts offered through the workplace are perfectly positioned to help people address life’s unexpected events and reduce their financial stress.”