We are pleased to see emergency savings provisions advance as part of the passage of the SECURE 2.0 Act of 2022, including the Emergency Savings Act introduced by Senators Booker and Young and the Enhancing Emergency and Retirement Savings Act introduced by Senators Lankford and Bennett. With this action, employers can now automatically enroll employees in emergency savings options associated with their 401(k), and employees will have new ways to respond to unexpected expenses without penalty. 

This is especially important for the tens of millions of Americans who live paycheck to paycheck, with little savings cushion, who are more likely to be women, and more likely to be Black or Latinx.

The passage of this legislation means Congress has done three vital things: validated that emergency savings matters, is important for retirement security, and should include an option for automatic enrollment and be eligible for employer matches; provided legislative clarity on concrete ways for plan sponsors and vendors to create practical emergency savings options in retirement plans; and, beginning in 2027, provided more accessible tax incentives to contribute to retirement plans.

As part of BlackRock’s Emergency Savings Initiative, we have extensively studied the role of emergency savings in the financial security of people earning low and moderate incomes, and research consistently demonstrates the key role that emergency savings plays in long-term financial security, such as retirement. 

Plan participants who have short-term emergency savings are less likely to take negative actions on their retirement in an emergency. These changes enacted by Congress enable research-backed design features – such as automatic enrollment – that we know help workers earning low and moderate incomes build emergency savings.

We have repeatedly seen the impact of workplace emergency savings initiatives in improving the financial security of workers earning low and moderate incomes. For example, a program implemented by UPS in partnership with their retirement provider, Voya, helped employees save more than $10M. This progress, part of BlackRock’s Emergency Savings Initiative, shows the potential of employer-sponsored emergency savings initiatives, and today’s action by Congress makes it easier for employers to offer even more  emergency savings tools to their workforce.

These provisions are an important step in enhancing emergency savings and financial security for workers. We look forward to continuing this important work next year to ensure that the millions of US workers who do not currently have access to or participate in a retirement savings plan can also benefit from automatic enrollment through future legislation.

-Timothy Flacke, Co-Founder and Executive Director, Commonwealth

Statement updated January 30, 2023.