Secure 2.0 Act of 2022 & The Power of Emergency Savings
Why should employers care about employee financial wellness, and how can the SECURE 2.0 Act of 2022 legislation help increase the financial stability of America’s workforce?
In brief.
Recently enacted Federal legislation seeks to increase the financial stability of the American workforce, directly addressing the governing dynamics that prevent broader adoption of retirement plans and emergency savings accounts through an array of new benefits for both employers and their employees.
The Secure 2.0 Act of 2022 includes key areas of legislation such as automatic enrollment, required minimum distributions (RMDs), catch-up contributions, student loan debt, saver’s match, and emergency savings for both full-time and part-time employees.
Still, the new laws aren’t a panacea.
Today, more than six out of ten employees across America are living paycheck to paycheck. This is an increase of over nine million Americans from the end of 2022. And the issue reaches across classes and touches both hourly and salaried workers. In December 2022, 50.8% of those earning over $100,000 annually reported they, too, are living paycheck to paycheck.
This harsh reality is the powerful backdrop for the Secure 2.0 Act legislation, but factors like ongoing inflation have put continued pressure on the American consumer, pressure which disproportionately effects Black, Hispanic, and middle-class employees.
For many of these workers, regular contribution to an established 401(k) isn’t feasible, and the need for emergency savings to address unavoidable and unexpected life-expenses is ever-present. And, as you may be aware, it has been widely researched that a sufficiently funded emergency savings account is the foundation of financial stability, delivering greater security for housing, transportation, and food, leading to wide-reaching positive outcomes for employees and employers alike, affecting everything from smoking cessation to employee engagement and retention rates.
But the Secure 2.0 Act only provides short-term emergency liquidity options for employees with retirement accounts, leaving nearly 60% of the American workforce out in the cold and forcing employers to solve this challenge through additional initiatives.
So, what’s next?
Given the sensitive nature of discussions involving personal finance, employers must first act with intention, taking the time to evaluate the needs in their organization and plan appropriately. In doing so, managers greatly increase the likelihood that the steps they take in support of their employees’ long-term financial well-being are successful. Here are some recommendations to create an actionable implementation plan for future programming:
- Take the “financial temperature” of your organization.
- Understand that leaders’ perspectives may be quite different than those of employees.
- Shift from a reactive to a proactive attitude when it comes to employee financial wellness.
- Commit to creating – and maintaining – a healthy work environment for everyone.