Employer-Supported Emergency Savings Features: Plan Sponsor Considerations
Employees, particularly those early in their careers, are worried about their ability to handle major, unexpected expenses. According to a new CAPTRUST report, emergency savings is the top financial concern for workers aged 18-30 and ranks among the top three worries for older employees.
For employers, this finding highlights a broader business challenge, as employees’ financial stress can affect productivity.
Employees Uneasy as Preparedness Lags
According to research by Empower, 50% of American workers admit they’re stressed about their current level of emergency savings. Additionally:
32% have no emergency savings
64% say building emergency savings is a top financial priority
52% regret not starting an emergency fund sooner
Empower also found that 29% of Americans say they can’t afford an unexpected expense of more than $400. While financial experts often recommend that individuals set aside an amount of emergency savings equal to six months of their salary, many U.S. adults fall well short of that benchmark. The Empower study found that median emergency savings across all Americans is just $500, with amounts varying by generation:
Gen Z: $400
Millennials: $300
Gen X: $500
Baby Boomers: $2,000
What Does This Mean for Employers?
According to the CAPTRUST study, three quarters of employees say that financial concerns affect their motivation at work, and 62% report experiencing moderate to severe stress that impacts their productivity and overall wellbeing.
According to a November 2025 report by Fidelity, employee financial stress costs employers $183 billion annually in lost productivity.
Emergency Savings Benefits
401(k)s and other workplace defined contribution plans can play a role in helping provide emergency savings, though using assets set aside for retirement savings has tradeoffs – namely, money taken from the plan will not compound over time to support a retirement nest egg.
According to an Employee Benefit Research Institute (EBRI) survey, 77% of responding firms offer or plan to offer emergency savings benefits in the next year or two. The most common emergency savings benefit is the ability to take loans from a 401(k) plan, made available by 56% of employers. While 21% allow up to $1,000 in penalty-free withdrawals for personal and financial emergencies from retirement accounts (a new plan feature option enacted in SECURE 2.0 effective in 2024), another 43% indicated they planned to implement this benefit within the next year or two.
Additionally, SECURE 2.0 allows eligible non-highly compensated employees as defined by the IRS to open pension-linked emergency savings accounts (PLESAs) as part of their retirement plan. PLESA balances can reach up to $2,500 and are funded with after-tax (Roth) contributions, enabling participants to withdraw funds early without being subject to the 10% early distribution penalty.
What Else Can Plan Sponsors Consider Doing?
While doing so would likely come at a cost, employers could consider leveraging retirement plan advisors to better support workers’ financial preparedness. Nearly all employee respondents to CAPTRUST’s survey (98%) said they would use an advisor if one were offered at no cost, and 40% identified one-on-one advice as the most helpful tool for easing their financial concerns.
Tailoring financial content and support by career stage also may help reduce stress levels. For example, early-career employees report the highest levels of mental and physical impact from financial stress, so they may require a different level of support than their older colleagues.
Sources:
https://www.empower.com/the-currency/money/safety-net-emergency-savings-research
https://www.fidelityworkplace.com/s/emergency-savings
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