Record keepers adapt to needs for expanded financial wellness

When it comes to financial wellness offerings, record keepers are no longer just pitching managed accounts and one-on-one participant advice services.

Record keepers these days are branching out into new areas of financial wellness, offering everything from online legal services to emergency savings programs and even charitable-giving platforms — all in a bid to strengthen relationships with their plan sponsors clients, industry observers say.

"Until a year or two ago, everyone was talking about retirement readiness, and now it's changed to just the overall financial health of an individual," said Robyn Credico, Willis Towers Watson PLC's Las Vegas-based defined contribution consulting leader.

Some record keepers are offering the services themselves, while others are teaming up with outside providers. Some charge for the new offerings, others give them to the plan sponsor for free, Ms. Credico said.

Many of the services cover entirely new areas, such as online legal providers that assist participants with matters such as wills or provide them with information on different types of insurance, including life and even pet insurance. For participants with "furry children," information about pet insurance can "definitely" help plan sponsors gain greater loyalty from their employees, said Jana Steele, a senior vice president and defined contribution consultant in Callan LLC's Chicago consulting office.

"When employees feel the employer cares about them, they're more likely to be highly engaged and have a stronger relationship," she said.

Other new emerging services, such as emergency savings, have been around for decades and are now getting a makeover. An emergency savings account or "rainy day fund" in a 401(k) plan is just an after-tax account, which has been around for a long time, Ms. Credico said. "What record keepers are doing is helping with repackaging and rebranding that as an emergency savings account," she said.

Ms. Steele agreed with the assessment, saying she recalls participants 15 to 20 years ago using the retirement plan after-tax contribution account as a "savings account for Christmas."

These after-tax accounts were primarily used by higher-paid employees who had maxed out their pretax contribution limits, according to industry experts.

Still, record keepers are promoting these after-tax contribution accounts as emergency savings accounts — and setting them up as either an in-plan option, meaning it is part of the retirement plan, or an out-of-plan option. If the emergency savings account is "in plan," it is subject to discrimination testing, unlike out-of-plan accounts, which are not.

In-plan emergency savings accounts use the same investment options as those offered in the retirement plan, while out-of-plan accounts typically use preservation of principal investments, such as money market funds.

Voya Financial Inc. opted to make both in-plan and out-of-plan emergency saving accounts available to plan sponsors. It launched an in-plan option in October 2020 and an out-of-plan option through Millennium Trust Co. LLC in March 2021. The company introduced the out-of-plan option because many plan sponsors did not want to commingle the emergency savings assets with the rest of their retirement assets, said Jeff Cimini, Voya's Windsor-Conn.-based senior vice president of retirement product management.

"They wanted a more flexible solution out of the plan without any kind of tax implications at all," he said, referring to the fact that participants in in-plan emergency savings accounts may have to pay taxes on earnings, including an additional 10% penalty on those earnings if withdrawn before age 59½.

Whether in-plan or out-of-plan, the emergency savings accounts are integrated with Voya's retirement plan website where Mr. Cimini said "participants can see their emergency savings balances" and "access associates at Voya through the call center."

Voya does not derive any revenue from the emergency savings accounts, he said.

Some record keepers are introducing services that do come with a fee. Fidelity Investments Inc., for instance, launched a charitable-giving platform in March 2019 for plan sponsors and their employees. To date, some 40 employers with 125,000 employees have adopted the platform, said Jesse Moore, Fidelity's Covington, Kentucky-based vice president of workplace giving and enablement.

"Our employers were seeking benefits that contribute to the total well-being of their employees, which included workplace giving," he said. The platform provides about 1.2 million charities from which employees can choose. Employees can view the charities to which they've donated, how much they've given and as well as which charities their employers support with matching gifts.

"One of the things that's very important is to make sure that we have a robust as well as vetted list of charities," Mr. Moore said.

The platform also tracks how much time employees volunteer to their chosen organizations, providing plan sponsors with a variety of metrics to help them measure employee engagement.

Last year, employees contributed roughly $10 million to charities on the platform, 10 times more than they did in 2019, according to Mr. Moore. "It's a pretty moderate amount for us, but relative to 2019 that was a significant increase," he said. Data about employee workplace giving are included alongside retirement plan and other employee benefits that Fidelity's plan sponsors offer their employees so that employees "can better understand how their charitable giving fits into their overall financial picture," Mr. Moore said.

Mr. Moore declined to disclose how much Fidelity charges for the platform, saying only that the fee depends on the needs and size of the plan sponsor and that is "very competitive within the market."

Mr. Moore said he wasn't aware of other record keepers offering charitable-giving platforms but that the market for the platforms was mature.

Record keepers are also delving into student debt repayment assistance programs. TIAA-CREF, for example, partnered with social impact technology startup Savi Technology Inc. to help its non-profit plan sponsor clients work with participants to lower their debt payments and seek relief by enrolling in the federal Public Service Loan Forgiveness program. While many non-profit employees qualify for the federal student debt relief program, not many do because it is cumbersome and difficult to navigate, said Snezana Zlatar, senior managing director and head of financial wellness advice and innovation at TIAA in New York.

Savi helps participants determine whether they qualify for the program and helps them apply for and stay compliant with the program, Ms. Zlatar said. Savi also helps participants reduce their monthly payments by developing an income-driven repayment plan, which sets monthly payments based on people's income.

Since the program launched in June 2020, 44 universities and health-care institutions have adopted the service with "three times as many looking to sign up," Ms. Zlatar said.

The 2,500 participants enrolled in the program are projected to save between $1,800 to $2,000 annually in reduced monthly payments and are on track to achieve average projected loan forgiveness of $50,000 per person. So far, the program projects almost $155 million in total projected forgiveness, Ms. Zlatar said.

"They provide real savings for individuals, which they can then direct toward their retirement savings or other long-term goals," she said.

While the service does not provide TIAA with a revenue stream, it deepens the record keeper's relationship with plan sponsor clients because "employers are aware that their employees are struggling with so many issues beyond retirement," Ms. Zlatar said.

Savi charges a very modest fee for the service, which typically participants but sometimes plan sponsors pay. The monthly cost for employees "is maybe two cups of coffee," a negligible amount, Ms. Zlater said, relative to the $1,800 to $2,000 participants save annually in monthly payments.

"That is real money that is helping individuals stabilize their daily finances and focus on long-term savings," she said.