Retirement law lets employers pair emergency savings and 401(k)s, but few are doing so

Employers don’t appear eager to mix their 401(k) plans with emergency savings options for workers, new research suggests.

Although companies have been permitted since 2024 to allow $1,000 emergency withdrawals from retirement savings and to offer 401(k)-linked emergency savings accounts, there’s been little adoption, according to a Vanguard report released this week.

Just 4% allow the $1,000 emergency 401(k) withdrawals, according to Vanguard’s analysis of 1,300 plans. And the 401(k)-linked emergency savings accounts “have generated minimal to no interest” from employers, the report notes.

Those two in-plan options were authorized under the 2022 retirement legislation known as Secure Act 2.0, amid growing concern about Americans’ lack of emergency savings.

Although the vast majority of employers are not providing the 401(k)-linked accounts — technically called pension-linked emergency savings accounts — some companies are offering external emergency savings accounts, said Craig Copeland, director of wealth benefits research for the Employee Benefit Research Institute. These external accounts are generally held at FDIC-insured banks and after-tax contributions are made through payroll deductions.