4 reasons to partner with an ESA provider

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Devin Miller
June 30, 2021

The advantages of Employer-Sponsored Emergency Savings Accounts

Key takeaways:

  • COVID-19 has demonstrated the importance of having emergency savings
  • An ESA provides a financial safety net for an employee
  • ESA funds are taxed as income and can be withdrawn immediately 
  • Employers can match employee ESA contributions
  • Recordkeepers, benefits brokers, and financial institutions can partner with ESA providers
  • Partnering with an ESA provider has several benefits 

For many people, COVID-19 has brought home the importance of having emergency savings. Millions lost their jobs during the pandemic or were put on furlough, especially those in the travel, restaurant, retail, and hospitality industries. Because of this, many recordkeepers, benefits brokers, and financial institutions started to partner with Emergency Savings Account (ESA) providers.

An ESA partner like Secure will make emergency savings a key part of your product lineup and an opportunity for growth. We explain ESAs and how they can benefit your employees and your organization.

Why should you offer an ESA for your clients?

The pandemic demonstrated how many people are only as little as one paycheck away from financial disaster. The loss of a job or reduced income means families might not be able to pay the mortgage/rent, make car payments, pay their bills, or even buy food. 

Families and individuals routinely experience financial emergencies or unexpected expenses, from medical bills to emergency home repairs. No matter the cause, financial troubles are very real for millions, leading to stress and physical and mental health issues. 

ESAs offer a way for employers to provide a safety net for their employees. Employees love them and employers are increasingly looking to provide them. ESAs also help businesses grow by generating new revenue and winning new accounts. 

What is an ESA?

An ESA works a lot like a 401(k) which you might provide as part of your employee benefits. The funds for the ESA are deducted from each employee’s paycheck and deposited into the emergency savings account. Unlike a 401(k), the funds are taxed as income. Your employees can also withdraw the funds without paying a penalty, taxes, or fees. 

How do ESAs work?

An employer-sponsored ESA allows your employees to have quick access to after-tax funds in an emergency. 

Each employee decides how much to deduct from their paycheck. Employers can also choose to match those contributions. Perhaps the best aspect of ESAs is that employees can start and stop deductions whenever they wish. Some employees might have a specific amount they want to save and once they reach that goal, they stop making automatic deductions. Or, an employee might get a bonus or a raise at work and increase their contribution. 

What organizations should partner with an ESA provider?

A wide variety of organizations choose to partner with ESA providers, including recordkeepers, benefits brokers, and a variety of financial institutions. Secure makes it easy for our partners to make emergency savings an important aspect of their employee benefits. It can also serve as part of your growth strategy, helping you to attract and retain the best talent. 

Benefits of partnering with an ESA provider 

Aside from attracting and retaining talent, partnering with an ESA offers many benefits for you, such as: 

  • Increased efficiency and production

American businesses lose $500 billion every year from employee financial strains. If an employee is experiencing financial stress, he or she might be distracted at work or miss work entirely. Distracted employees can lead to costly mistakes or injuries. In either case, you end up paying the price in many ways. 

  • Stand out benefits

Believe it or not, many companies are struggling to fill key positions right now. Offering good benefits is one way you can stand out from competitors and attract the best talent. Many companies make the mistake of thinking that benefits only equal salary. Today’s employees are interested in more than money, however. Good benefits should also include health and wellness perks, employer-matching retirement savings accounts like a 401(k), and vacation days/paid time off (PTO). 

Adding employer emergency savings accounts to your list of benefits is one more way you can “pay” your employees. You can also show that you have your employees’ backs in an emergency. 

  • Short-term savings options

An ESA offers unique, short-term advantages to employees. A retirement account focuses more on the future. A 401(k) helps someone save enough to have a comfortable retirement years from now. An ESA provides immediate access to funds with no penalties, taxes, or fees for early withdrawal. 

If an employee were to access a retirement account before age 59.5, it would trigger a 10% early withdrawal fee. Taking a loan from a 401(k) requires the employee to pay interest when he or she repays the loan. 

  • A benefit for companies that don’t have a retirement plan

If you’re a small business that doesn’t offer retirement plans – or you have employees who aren’t eligible for a plan – an ESA is a way to offer protection and extra benefits. 

Retirement savings have also been impacted by the pandemic. Studies have shown that contributions to retirement funds dropped significantly as employees didn’t want to tie up money in long-term investments. On the other hand, ESAs have become more popular since employees are more interested in having cash on hand to pay expenses. 

Creating and maintaining an employer-sponsored ESA is much less expensive compared to sponsoring a 401(k). Even minimal matches can increase employee participation rates. 

  • Create financial peace of mind

You know that financial stress affects every area of your life. An employer-sponsored ESA is one way you can change the way your employees deal with a financial crisis. The stress and worry over how to pay bills or afford food for their children lead to anxiety and even depression. By providing an ESA you can give your employees the tools they need to create financial peace of mind. 

With their finances in order, your employees will be better able to focus on their jobs.

Partner with Secure and protect your employees’ financial health

Make emergency savings a key part of your business’s growth strategy. It’s a great benefit that employees will want and appreciate. It’s also a way to generate revenue, win new accounts, and attract and retain the best talent.

Join our partner program to start referring companies and gain access to special promotions and discounts for your clients. Contact us today to get started. We can also discuss other ways partnering with Secure can benefit you, including asset management, product integrations, and bundling services. 


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