Vaccines are rolling out, pandemic restrictions are easing, and the American economy is expected to experience strong growth, as much as 8% by some estimates, in 2021. If only recovery from the pandemic were that easy.

While pent-up consumer demand is expected to fuel economic growth, the physical, emotional, and financial consequences of Covid-19 are likely to linger for some time. Stress levels in the United States are the highest they’ve been in years. Many Americans have lost jobs, left jobs, accepted wage cuts, and depleted their emergency savings. They have changed the way they work and the way they live. Roughly half of non-retired adults say it is more difficult to reach their long-term financial goals than it once was, reported Pew Research.

The bottom line is that anxiety is high and morale is low – a combination that hurts workplace productivity. Consequently, employers that once shied away from retirement benefits and financial wellness programs, due to perceived high costs or lack of employee demand, are now interested in retirement plans and emergency savings programs, and employees who were once reluctant to participate may now be ready to join.

Advisors who can deliver reasonably priced solutions have an opportunity to build new relationships and strengthen existing ones. It’s an important time to talk with current and prospective business owner and retirement plan clients about the programs they want to put in place to help their businesses thrive.

Emergency savings solutions as a workplace benefit are in demand.
The events of 2020 highlighted and underlined the importance of emergency savings. Some who had savings depleted their accounts; others wished they’d saved. As the pandemic tide ebbs, more people recognize that emergency savings are a necessity. That is why companies of all sizes are adding emergency savings solutions to their financial wellness programs.

Ideally, emergency savings solutions offer easy enrollment, quick access to funds, flexibility to stop or modify contributions, and account portability. There are a variety of structures that can be employed. Each has pros and cons.

Payroll Deduction Emergency Savings Accounts
One option is payroll-deduction savings accounts, which give employees the option to direct a portion of pay to savings accounts they’ve opened at financial institutions.

This option is easy to put in place and administer. Employees open highly-liquid, short-term savings accounts with banks or financial institutions. Then, the employer sends funds to the accounts, which often are protected by FDIC insurance. There are no contribution limits, and employees can access the money at any time. Through workplace programs, employers can also set up matching contributions if they so choose.

The money in these accounts is readily accessible, which can be beneficial and problematic. Assets in savings accounts can be withdrawn immediately, at any time and for any reason, so the funds can easily be spent on non-emergency expenses. Other solutions require a brief wait before funds are available, which could reduce withdrawals. Either way, an educational element regarding financial wellness and emergency savings is critical for the success of these programs.

Payroll-Deduction Roth IRAs
Roth IRAs also are simple to implement and administer. With this option, employees can direct a portion of pay to Roth IRAs that have been opened through IRA providers. Contribution amounts are determined by employees’ income and IRS limits.

The employer sends the funds to tax-advantaged Roth IRA accounts that are owned and controlled by employees. The accounts are portable, so the assets stay with workers when they change jobs or retire.

Roth IRAs offer significant liquidity; however, the potential tax consequences could make employees think twice before taking non-emergency distributions. Contributions to Roth IRAs may be withdrawn tax-free and penalty-free, but any earnings may be subject to early withdrawal penalties and taxes.

Options For 401(k) Plan Sponsors
Qualified retirement plan accounts can be re-purposed to create emergency savings solutions, such as including after-tax contribution accounts and deemed IRA accounts. Employees can choose to contribute and may receive tax benefits. Employer matching contributions may be possible. These accounts are controlled by the employer and tend to be more complex to implement and administrate.

Employers also have the option to implement emergency savings fund solutions as an out-of-plan workplace benefit. These programs are managed by financial institutions that take care of recordkeeping and administration. The accounts can be funded through payroll deduction and act as a complementary savings vehicle to retirement savings.

A recently recognized benefit is that emergency savings can protect retirement savings—which many people turn to in emergencies—and that can help improve retirement outcomes. No matter how emergency savings solutions are structured, they offer a wealth of benefits, helping to improve workers’ financial health and boosting engagement, productivity, loyalty, and satisfaction.

Low cost retirement plans appeal to small business owner clients.
In a March interview with Mary Louise Kelly of NPR, destination restaurant owner and chef Amanda Cohen said, “We’ve all sort of had a year to reflect on how we want to run our businesses and how we can change them…I’d like to set up some more programs so my employees have a bit more support…I think there’s so much more we can do for our employees.”

After financial education and counseling, an important way that smaller employers can support employees’ financial health is by introducing workplace retirement plans. While the majority (85%) of companies with 100 or more workers have access to retirement plans through work, almost half (47%) of those at smaller companies do not.

Balancing company finances and employee programs can be tricky. However, there are a variety of workplace retirement plans designed specifically for smaller businesses that need to keep costs low. These include:

• Savings Incentive Match Plans for Employees (SIMPLE) IRAs, which can be affordable solutions for employers with 100 or fewer employees.
• Simplified Employee Pension plans (SEP IRAs), which are typically attractive options for sole-proprietors and family-owned businesses.
• Payroll Deduction IRA plans, which are cost-effective options with no contributions or plan-level reporting for the employer.

The SECURE Act has also made multiple employer plans (MEPs) more attractive to companies that prefer to share a qualified retirement plan, as well as the expenses and responsibilities, with other companies.

Small rewards today can lead to bigger rewards tomorrow.
Advisors have an opportunity to help companies that are recovering from sometimes dire financial circumstances by educating them about low cost retirement and financial wellness solutions. The reward today may be relatively small, but it has significant potential to grow over time. Building strong relationships today may help you win additional business as companies grow, employee needs change, and retirement and financial wellness programs expand.

In 2021, financial advisors are marshalling their considerable knowledge to help Americans rebuild financial and retirement security, in many cases, starting through the workplace.

Pete Welsh is Head of Retirement Services at Millennium Trust Company LLC. He has spent most of his career in the retirement industry, building relationships and working closely with recordkeepers, TPAs and other organizations. Millennium Trust Company performs the duties of a directed custodian, and as such does not offer or sell investments or provide investment, legal or tax advice.