Expanding its universe from HSAs, FSAs and other employee-benefit accounts, HSA Bank this week announced that it will begin offering an emergency savings account (ESA) solution.
The ESA is an employer-sponsored, consumer-owned bank account intended to help employees save for unexpected expenses and support their financial well-being, according to the company's description of the new program. The ESA holds funds specifically set aside for unplanned expenses or financial emergencies. In addition, it can be integrated with payroll deductions so employees can make automatic deposits.
The description further specifies that, because the ESA is a non-ERISA plan, it can be added at any time throughout the plan year and can be made available to all employees regardless of number of hours worked or enrollment in other benefits. Additionally, employers can make post-tax contributions to the accounts.
HSA Bank also emphasizes that the accounts use automation and behavioral science to create incentives to encourage employees to participate in the program and build emergency savings. As an after-tax funded account, employers can offer incentives like signup, matching and milestone bonuses. Funds are accessible whenever they are needed and there are no restrictions as to what they can be spent on, the announcement further explains.
A recent survey from Webster Bank (parent company of HSA Bank) that shows that nearly 6 in 10 Americans (57%) say saving for emergencies is a top financial priority, but nearly a third (31%) do not have an emergency fund.
“Financial wellness is one of the fastest growing areas of focus for employers and ESAs are a critical part of financial planning alongside retirement and healthcare spending,” stated HSA Bank President Chad Wilkins. “This new offering continues to expand HSA Bank’s product suite to ensure we’re helping employers retain and attract new talent.”
Emergency savings has been a significant focus of the retirement industry as plan sponsors and retirement plan providers seek to enhance the financial wellness of plan participants. And the SECURE 2.0 Act helped pave the way for the establishment of ESAs.
Section 127 of the legislation established pension-linked emergency savings accounts (PLESAs), allowing participants to contribute up to $2,500 through Roth contributions to a separate emergency savings account in a defined contribution plan.
Section 115 of the legislation provides an exception from the 10% early withdrawal penalty for certain distributions used for emergency expenses. Only one distribution is permissible per year of up to $1,000, with the option to repay the distribution within three years. No further emergency distribution is allowed during the three-year repayment period unless recontribution occurs.
Employers, meanwhile, can also establish out-of-plan emergency savings accounts that work as a standalone benefit that functions similarly to other types of spending accounts.
More information on HSA Bank’s ESA offering is available here.
