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    Why States Are Offering Workers at Private Companies Access to I.R.A.s

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    With the plans, workers are automatically enrolled and contribute through payroll deductions. The goal is to help more Americans save for retirement.Traditional pensions are increasingly rare. About half of employees at private companies don’t have access to a retirement plan. And retirees themselves say they haven’t saved enough.That is why states have decided to step in and offer retirement accounts for private-sector employees, helping workers to save more and, new research shows, perhaps even spurring companies to offer their own workplace retirement plans.Automatic individual retirement account programs, known as “auto-I.R.A.s,” typically require private employers that don’t offer workplace retirement plans like 401(k)s to register for state-run plans.Workers are automatically enrolled in I.R.A.s, often with 3 to 5 percent of their income deducted from their paychecks, but can change the amount or opt out if they prefer. The employers — typically small businesses and nonprofits — provide access to payroll deductions to ease worker contributions, but don’t oversee the plan or pay fees.Auto-I.R.A.s are now available in 10 states, including New Jersey and Delaware, which started plans this summer, and soon will be in seven more, according to the Georgetown University Center for Retirement Initiatives. At the end of October, there were more than 930,000 accounts with $1.7 billion in savings for the eight plans for which data was available, according to the Georgetown center.Workers can, of course, open an I.R.A. on their own at a bank or brokerage. But few workers do so, perhaps because of inertia or because they are intimidated about making investment choices.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Employers Can Now Enroll Workers in Some Emergency Savings Accounts

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      But many companies are spurning the “clunky” legal requirements for accounts linked to retirement plans. Instead, some have stand-alone rainy day offerings.Starting this year, a federal law allows employers to enroll workers in emergency savings accounts that are linked to their retirement accounts. But some companies, put off by the law’s complex rules, have begun offering rainy day benefits outside workplace retirement plans.“I do think there is tremendous interest in emergency savings programs,” said Matt Bahl, vice president and head of workplace financial health at the Financial Health Network, a nonprofit that promotes financial well-being. “Having access to liquid cash can greatly reduce levels of financial stress.”The Employee Benefit Research Institute, a nonprofit, found that about three-fourths of large employers (those with 500 or more workers) offered or planned to offer hardship or emergency assistance programs to workers last year. Of those, about a third said they offered an emergency savings account feature and another third planned to do so in the next year or two.But while the law, known as Secure 2.0, has helped draw attention to the need for rainy day savings, its rules for setting up emergency accounts within retirement plans are “clunky,” Mr. Bahl said. For instance, only workers making under a certain income limit ($155,000 for 2024) may participate, and their emergency savings are limited to $2,500, though employers can set lower ceilings. And though employers can help with contributions, they must deposit any match into the worker’s retirement account — not the emergency savings account.While employers may eventually choose to offer such “sidecar” savings accounts, stand-alone emergency savings programs are already available from financial technology start-ups and established retirement plan administrators. With emergency savings offerings, “it’s really important to be broadly available and simple to use,” said Emily Kolle, a vice president who oversees the emergency savings offering from Fidelity Investments, one of the largest retirement plan administrators.Emergency savings — a cash cushion available in the event of a job loss or surprise expenses like car repairs or medical bills — are a concern for many Americans. In a recent survey by the financial site Bankrate, about a third said they would have to borrow to cover a $1,000 unexpected expense. And almost a quarter of consumers have no savings set aside for emergencies, according to the Consumer Financial Protection Bureau.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More