Would you like your 401(k) with a side of emergency savings?

investmentnews.com:

A big theme in the retirement savings world next year will be emergency savings accounts.

Starting in 2024, a provision of the Secure 2.0 Act kicks in that allows employers to add emergency accounts alongside their 401(k) plans. Those Roth-style accounts will be able to hold as much as $2,500 in employee contributions before they max out, with further contributions potentially directed into the 401(k) account.

Most retirement plan record keepers as well as other service providers are interested in the idea, and companies like Vestwell and Candidly are quickly building programs that would launch next year.

“We’ve already been engaged with one of our core partners in building this out. We’re planning to go to market in the first part of next year,” Vestwell CEO Aaron Schumm said. “We’re building it to sit alongside the 401(k), so [it is] not in the plan itself. It’s like a sidecar.”

The fintech firm plans to offer a variety of ways to structure emergency savings programs, so that employers could automatically enroll workers or leave it to them to sign up.

It’s a benefit that has gained interest not just as aspects of Secure 2.0 go into effect, but as employers have gravitated toward providing additional financial benefits for workers, such as student loan repayments, Schumm noted. Vestwell recently closed on its acquisition of student loan benefit company Gradifi Solutions, which was previously owned by Morgan Stanley.

“Most people who take a loan or a hardship [distribution] out of a 401(k) are at a financially stressed point in their life,” he said. For employers, an emergency account provides “one less thing to think about” as an alternative to offering loans in their 401(k) plans, “and for the employee, it’s better