WSJ EMERGENCY HOUSEHOLD FUNDS
This assignment is worth 10 points total (5 points available per question). Read the article linked below and answer the two questions. Your answer to each of the questions should be in your own words, adhere to the expected 200 or more word count criteria, and exhibit depth of analysis by connecting the concept to a principle in your textbook or other related article or reading (need to cite references). Please number your answers to show which question you are answering. Your answers will be scanned by Turnitin similarity and artificial intelligence check; reports will be published to you after grading has been completed.
Employers Help Workers Build Household Emergency FundsDownload Employers Help Workers Build Household Emergency Funds
1. Are rainy-day accounts helpful and meaningful to employees?
2. Is this a genuine HR service provided by employers, or is it mostly self-serving?
Employers Help Workers Build
Household-Emergency Funds
Levi Strauss and SunTrust among companies
encouraging setup of rainy-day accounts,
reflecting 401(k) and productivity concerns
Tergesen, Anne. Wall Street Journal (Online)
New York, N.Y. [New York, N.Y]13 June 2019.
A growing number of employers are helping workers start emergency savings accounts ,
reflecting concern over the impact money problems are having on productivity levels and
workers' ability to retire.
Companies including Levi Strauss & Co., SunTrust Banks Inc. and Kroger Co. are encouraging
employees to fund emergency accounts, in some cases by offering them cash and other
incentives. Others are diverting a portion of employees' paychecks into rainy-day funds related to
their 401(k) plans.
The aim: encourage employees to get their finances in order on all fronts.
"There is a growing recognition on the part of employers that people cannot save for retirement
if they don't also save for emergencies and figure out a way to pay down debt," said Ida
Rademacher, executive director of the Aspen Institute's Financial Security Program.
In February, BlackRock Inc. pledged $50 million to develop programs with nonprofits,
companies and academics to help workers build emergency savings . In April, a bipartisan group
of U.S. senators introduced a bill to make it easier for employers to enroll workers automatically
into emergency-savings accounts. (Under the legislation, employees would be able to opt out.)
The companies are responding to data that indicate American workers are financially stressed.
Employees withdraw 30 to 40 cents of every dollar that goes into a 401(k) account before
retirement, often to compensate for shocks to income, according to researchers at the Federal
Reserve and the Internal Revenue Service.
This leakage threatens to reduce the wealth in U.S. retirement accounts by about 25% over 30
years, according to an analysis by Boston College's Center for Retirement Research. The center
says half of U.S. households are at risk of being unable to maintain their standard of living in
retirement.
Employers are also concerned about the impact of financial stress on productivity.
In a 2018 paper, researchers at the University of Pittsburgh found that truckers who reported
financial worries were more distracted and had more accidents, inflating one company's total by
about eight accidents a year.
Many Americans are experiencing stagnant incomes and rising costs, said Ms. Rademacher, who
argues that employers should focus on improving job quality and pay, as well as on ways to
make it easier for workers to save.
The need for emergency savings applies to people across the income spectrum. Expenses for
households with median incomes fluctuate by nearly $1,300 a month, according to the JPMorgan
Chase Institute.
The median cost of an unexpected major expense, such as home repairs or a hospitalization, was
about $2,000, according to a 2015 report from Pew Charitable Trusts.
"We always knew people with minimum-wage jobs were experiencing financial stress, but the
middle class is now also experiencing significant stress that wasn't there a generation ago," said
Carrie Leana, a professor of organizations and management at the University of Pittsburgh and a
co-author of the 2018 study.
SunTrust gives employees $1,000 if they complete an eight-part financial-education course and
take certain actions, including funneling automatic contributions of at least $20 per pay period to
emergency savings.
The bank has spent more than $18 million on the incentives and 18,000, or about 80%, of its
employees are participating.
SunTrust offers the program at cost to 200 other companies including Home Depot Inc. One-
third of the companies offer cash incentives that average $250. More than 95% of the
participants who have completed the financial education course at these companies have
emergency-savings accounts, up from 70% at the time of enrollment, with an average increase in
balance of more than $1,200, said Brian Nelson Ford, a financial-well-being executive at
SunTrust.
Andre Dyer, 50 years old, an executive recruiter at SunTrust, said his finances were precarious
until he participated in the program.
"We never had emergency cash," said Mr. Dyer, who borrowed $4,500 from his mother in 2013
to prevent foreclosure. "We had a jar on our kitchen counter with change in it."
Since completing the program in 2014, Mr. Dyer has contributed an average of $600 a month to
an emergency fund. He and his wife have paid off $35,000 in debt since 2013, started saving for
their daughters' college educations and amassed more than $100,000 in 401(k)s.
The emergency fund "enables us to have some peace of mind," he said.
Levi Strauss has started offering its hourly workforce up to $240 over six months for
contributions to an emergency savings account through its employee assistance fund.
More than 1,300 of 4,200 eligible employees have enrolled, saving $700 on average over six
months.
The match "keeps savings top of mind," said Leigh Phillips, chief executive of Earn, the
nonprofit that created the platform Levi Strauss uses.
WesBanco Inc., based in Wheeling, W.Va., recently began offering its employees the
opportunity to earn points to reduce health-insurance premiums by enrolling in a program called
Split to Save. Employees who sign up divide their paycheck between a checking account for
daily expenses and a savings account for goals including emergencies.
So far, 13% have enrolled and are saving an average of $132 a month, said Anthony Pietranton,
executive vice president of human resources.
Backed by the nonprofit America Saves, the Split to Save program has been available to
employers for a year. Eight companies, including WesBanco and Kroger, are using it, said
George Barany, America Saves director.
Prudential Retirement, a 401(k) record-keeper, is trying another approach.
Since 2018, it has been testing a program that allows employees at 20 companies that use
Prudential as a 401(k) administrator to contribute to both a 401(k) account and, using after-tax
payroll deductions, a linked emergency-savings option within the account. So far, 250 people
have enrolled and are contributing an average of 1% of pay to the emergency-savings portion of
the account, said Harry Dalessio, head of full service solutions at Prudential Retirement.
Share Your Thoughts
How much do you have set aside for emergencies? Do you think companies should help
employees save for such expenses? Join the conversation below.
While that is a small fraction of the 100,000 workers who are eligible for the voluntary program,
Mr. Dalessio said Prudential expects to make the program available to a few thousand more
clients later this year and "supports legislative changes" to make it easier for employers to enroll
employees in emergency accounts automatically.
SafetyNet, a subsidiary of Madison, Wis.-based CUNA Mutual Group, allows employees to link
their bank and credit cards to its program. Known as Cookie Jar, it rounds up purchases to the
next dollar and deposits the difference, paid by the employee, into a bank account.
Since the product's launch four months ago, 12 companies have joined. Each has elected to
provide a matching contribution of $10 or $20 a month.
So far, 40% of eligible employees have enrolled, saving an average of $105 over four months,
said Dan Murray, chief operating officer at SafetyNet.
Credit: By Anne Tergesen