You’ve probably heard all about the damage that 401(k) loans and hardship withdrawals can do to people’s ability to save for retirement: workers who take out loans miss out on growth while the money is borrowed, and older workers especially can feel the impact when it comes time to retire.
Women and BIPOC already have less money saved for retirement than their white male peers. But on top of that, they’re also more likely to take out a 401(k) loan or withdrawal, setting them even further behind.
And this problem is finally gaining more attention: The NYTimes recently wrote a feature highlighting the issue, comparing women’s retirement accounts to “family emergency funds.”
The main reason that women and BIPOC are more likely to withdraw from their 401(k) is the lack of emergency funds, both because of lower pay and structural inequalities that make it harder to accumulate wealth and in the case of women, because of career interruptions for raising children.
For a workplace to be truly inclusive and diverse, benefits packages (including retirement plans) must meet the needs of diverse groups better. Hence, they must be “inclusive benefits.”
What are inclusive benefits and why do they matter?
Inclusive employee benefits are benefits that are accessible, and provide equitable positive financial outcomes to everyone, regardless of to everyone, regardless of income, age, sexual orientation, race, gender, ability, or marital status.
At Sunny Day Fund, we take that definition a step further. We believe that truly inclusive benefits are designed for a diverse workforce, and actively work to create a more equitable environment. Inclusive benefits are also financially inclusive, because offering benefits that disproportionately advantage the top earners at your company leaves the majority of your workforce behind.
Inclusive benefits show your employees that you value the whole, diverse workforce irrespective of pay. They can also help reach internal diversity, equity, and inclusion (DEI) goals and mitigate the risk of discrimination lawsuits. They make it easier to attract and retain talent, especially in the current competitive landscape.
Inclusive benefits are good for your employees, and for your company too.
How to make benefits at your company more inclusive
If you already offer benefits at your company, the next step is to figure out how inclusive they already are.
Take an objective look at your offerings through the lens of gender, race, ability, and financial inclusion. If you offer retirement benefits, are your employees stable enough financially to be able to put part of their paycheck aside every month – or will some need to tap their 401(k) for an emergency in the future? Are you able to offer employees some schedule flexibility? Does your PTO and holiday policy provide flexibility for different religious or cultural events? Do you offer or contribute to healthcare, and if so does it cover things like gender-affirming surgery or IVF? All of these things can contribute to building a more diverse and inclusive workplace.
There are already several research groups that have begun to analyze financial inclusion and equity in retirement plans: DCIIA, Morningstar, EBRI, and Aspen FSP have great resources to help you look at benefits offerings from a more inclusive lens. For example, EBRI’s 2021 Retirement Confidence Survey looks at the wealth and retirement savings gap between Black, Hispanic, and white Americans.
The key to making your benefits more inclusive is to look at policies that benefit all of your workers, not just those at the top. In other words, you need to “flip the pyramid” and focus on adding resources and support for your wider workforce.
Here are some specific ideas you can use to make the benefits at your company more inclusive for all:
Examples of inclusive benefits to offer
For starters, there are concrete financial benefits that you can offer employees to help create a more equitable workplace, and many of these come with tax benefits for your company.
- A childcare stipend for parents of young children. Some companies also offer on-site childcare or extra tutoring stipends.
- Tuition reimbursement has the added advantage of upskilling your existing workforce. If you choose to offer tuition reimbursement, include professional certifications and programs outside of traditional four-year colleges—that way, all of your employees can potentially benefit.
- As an emergency savings solution, Sunny Day Fund is obviously biased towards employer-rewarded emergency savings accounts and workplace savings programs more broadly. They’re a powerful, inexpensive, and increasingly attractive tool to address financial inequity within your company and help your entire workforce build financial resilience and achieve pre-retirement life goals.
Learn more about employer-rewarded emergency savings.
Retirement benefits are ubiquitous in benefits packages, and employees value them highly—according to our research, the only benefit employees care about more is health insurance. Offering retirement benefits is a great first step, but there are specific ways you can design your plan to make it more inclusive and make sure it isn’t leaving lower-earning employees behind:
- Use automatic enrollment. Studies show that fewer people opt out of defined benefit plans, and automatic enrollment is a great tool to make sure as many employees as possible are saving for retirement.
- Use non-elective contributions, even for employees who don’t or are not in a position to contribute. Non-elective contributions mean that all employees save for retirement, even if they can’t afford to contribute a percentage of their own salary. It’s a great tool for inclusive retirement planning (in addition to offering employee contribution matching).
- Offer student loan retirement matching by matching what employees pay in student loans with contributions to their retirement plan. This allows people with heavy loan burdens to start saving for retirement sooner and puts them on more equal footing with employees who have smaller loan burdens.
Access to healthcare is the benefit employees value most highly. To make your health benefits more inclusive, consider:
- Offer affordable healthcare insurance with sufficient access: With rising healthcare and insurance costs, employers are being forced to make difficult decisions on what type of plans to offer and how much to cover. During these considerations, it’s imperative that employers consider their employees’ waning budgets, or risk lower participation.
- Consider alternatives to traditional insurance models: With growing part-time labor and shrinking budgets, some models allow for retail clinic and urgent care coverage accessible geographically and financially by more frontline workers.
- Enable care access when employees need it most: Fertility coverage, family planning including abortion, and gender reassignment are all tough issues for an employer to navigate. Talk with a DEI-trained benefits consultant to evaluate coverage and access options.
- Offer an employee assistance program (EAP) or a resource navigation service: EAPs help with short-term counseling for employees who are struggling, at no cost to the employee. Resource navigators go beyond traditional EAPs and bring into the fold public resources, such as grant funding.
If you can, offering schedule flexibility is a great way to even the playing field a little for employees who have commitments outside of work but still do their job well.
- Add care leave to your sick leave policy, to make space for employees caring for sick family members.
- Make it possible for non-Christian employees to take their religious holidays off without using PTO. This can be a useful trade-off if you need coverage on certain Christian holidays that many people don’t wish to work, like Christmas.
- Make parental leave available to all parents rather than maternity leave.
- Include mental health in your sick leave policy.
- As much as possible, give employees the option to flex their schedules.
- Offer parental leave for parents who are adopting a child.
Use Sunny Day Funds to start making your benefits more financially equitable today
Sunny Day Funds can help you make your workforce more resilient with a financially inclusive and equitable benefits program. Help your employees build up their emergency savings with our award-winning tool today. Get in touch!