A significant percentage of Americans are unprepared to pay for unexpected expenses — more than one-third do not have enough money saved to handle a $400 emergency. The employee benefits ecosystem is increasingly looking for ways to help employees build financial wellness, including emergency savings, and retirement plan recordkeepers have a role to play.

Emergency savings: Not if, but how and when

Commonwealth and the Defined Contribution Institutional Investment Association (DCIIA) Retirement Research Center interviewed nine of the nation's largest recordkeepers along with a cross section of plan sponsors across the United States to find out their plans and perspectives on workplace emergency savings products. The report predicts it is not a matter of if recordkeepers will offer emergency savings plans but how and when.

In-plan and out-of-plan options

All but one of the recordkeepers interviewed for the study offer or are planning to offer an in-plan or out-of-plan emergency savings product, although the majority were leaning toward offering out-of-plan solutions and several indicated they would offer both types. In-plan options offered through a 401(k) plan offer the benefit of leveraging pre-existing payroll integration and could spur increased plan participation. The benefits of out-of-plan options include quicker time to market, the ability to include engaging product features, and portability among employers.