On Dec. 29, 2022, President Biden signed a $1.7 trillion omnibus spending package containing the SECURE 2.0 Act—a retirement reform bill that promises to have a significant impact on American savers, their employers and the firms that administer their retirement plans. The Act includes provisions for mandatory auto-enrollment and deferral rate escalation, reduced hurdles for part-time employees seeking to participate in their employer-sponsored plans, and a slew changes to RMD rules, including higher required distribution start ages and reduced tax penalties for missed distributions. In addition to these changes, the Act includes notable emergency savings and student debt provisions intended to help participants better balance short- and long-term financial priorities:
- Emergency Savings – starting in 2024, employers can offer dedicated emergency savings accounts that are linked to employer-sponsored retirement plan accounts; these accounts are capped at $2,500, and employers have the option to offer matching contributions.
- Relatedly, participants will be able to withdraw up to $1,000 from their retirement savings account to pay for emergency expenses without incurring the typical tax penalty or needing to provide exhaustive documentation to justify the withdrawal.
- Student Loan – starting in 2024, employers can make matching contributions to DC plans based on participants’ student loan repayments. Previously, employers could only make non-elective contributions based on student loan repayment, which had the drawback of potentially complicating nondiscrimination testing.
Out of the Secure 2.0 Act’s provisions, these components will likely entail the most significant changes to the digital experiences retirement firms provide to participants. The availability of linked emergency savings accounts seems likely to accelerate an already rapid push by many leading recordkeepers to expand their digital offerings to include holistic financial planning resources, mainly through the introduction of account aggregation features and financial wellness programs. Similarly, the introduction of employer matching tied to student loan payments could spur firms to introduce new student debt solutions and increase the importance of existing solutions. Both provisions may require modifications to contribution rate transactional interfaces—a key area of participant sites and mobile apps. More broadly, the integration of emergency savings accounts and student loan data may provide recordkeepers with new opportunities to build acquisition funnels into participant platforms, leveraging emergency savings and student debt solutions to deepen relationships with participants and possibly promote appropriate retail offerings.
In 2022 several recordkeepers introduced changes to the digital participant experience to better integrate emergency savings account services and provide well-rounded support for participants with student debt—we highlight some of the more notable changes below.
In May 2022 Fidelity introduced its Goal Booster tool—part of an impressive collection of new resources that helped the firm earn the gold medal for the Tool & Calculators in our Annual Retirement Plan Monitor Awards Report. Goal Booster helps participants develop short-term savings plans and matches them with appropriate Fidelity investment and/or savings vehicles​. The tool can automatically import eligible goals participants have created in Fidelity’s Planning & Guidance Center and offers preset categories for new savings goals, including Home, Wedding, Vacation, Car, Baby, Rainy Day and Other.
Though the tool is housed on the firm’s retail brokerage site—Fidelity.com—the NetBenefits participant site offers an easily findable link via the main menu. Tellingly, the firm also promotes the tool on its educational Emergency Savings page—making it clear that the firm views it as a suitable vehicle for participants looking to establish an emergency savings account. More broadly, Fidelity appears well-positioned to integrate emergency savings accounts into the participant site thanks to its account aggregation capabilities, holistic planning resources—such as the Planning & Guidance Center and Full View tool—and the ability to offer participants seamless navigation between the NetBenefits platform and retail brokerage site.
Also in May 2022, Empower revamped its participant site and mobile app to integrate capabilities from Personal Capital—which the recordkeeper acquired in 2020—a move that helped the firm earn the gold medal for the Account Information category in our Annual Retirement Plan Monitor Awards Report. With the revamp, the firm expanded the focus of its platforms to provide a wealth of holistic planning resources, which notably include tools to track savings goals and debt payments. With the firm’s new robust account aggregation capabilities, participants can link outside accounts to populate a collection of homepage tiles devoted to general financial planning. The homepage sports two tiles particularly relevant to this discussion—Debt Paydown and Emergency Fund.
The Emergency Fund tile displays participants’ emergency savings fund balance and a historical bar graph showing their target emergency fund range and the fund balance for each month of the current year. The tile links to the firm’s full Savings Planner tool, which includes an Emergency Fund tab where participants can view additional analysis and adjust which accounts are assigned to the fund. The Debt Paydown tile offers a graph showing YTD changes in debt and lists the total debt amount and total YTD change. Like the Emergency Fund tile, the Debt Paydown tile links to the corresponding tab of the Savings Planner, where participants can find account-specific breakdowns and general tips for managing debt.
Also of note, Empower introduced a dedicated Student Loan sitelet in partnership with third-party provider Candidly in December 2022. The sitelet offers a suite of features to help participants pay off student loans, including an easy-to-use autopay feature and a program where participants can earn cash back from select retailers and automatically apply it towards their loan payments. If participants have linked student loan accounts to their account, the sitelet automatically imports the relevant data to inform its analysis and recommendations.
The SECURE 2.0 Act’s emergency savings and student loan provisions do not go into effect until 2024; however, leading retirement firms rarely display the agility that, for example, often characterizes fintech firms, which tend to be leaner and subject to less regulatory oversight. This means that retirement plan providers that have not yet built the digital infrastructure needed to support linked emergency savings accounts and student loan contribution matching may struggle to introduce those features by 2024.  On the other hand, recordkeepers that have already introduced robust holistic financial planning resources—such as Fidelity and Empower—are poised to hit the ground running.
Subscribers can find a full breakdown of the resources discussed here in our May 2022 and January 2023 Retirement Plan Monitor Updates and can find analysis of these firm’s particular digital strengths in our 2022 Annual Retirement Plan Monitor Awards Report. Not a subscriber? Learn more here about CI’s research services for plan sponsors, plan participants and workplace finance programs. Or contact us to learn what our research can do for your organization.