Assets in the Workplace

1
Assets in the Workplace

• Ellen Seidman
• Director of Financial Services Policy
• Asset Building Program
• New America Foundation
• seidman_at_newamerica.net
• Invitational Business Roundtable
• 2008 Assets Learning Conference
• September 11, 2008

2
Why Assets?

• Income helps you get by assets help you get
  ahead
• Benefits of assets
• Income smoothing
• Security, future orientation
• Leverage for safe credit-based asset-building
• Access to lower-priced, higher-quality investment
  opportunities and credit
• Enables intergenerational wealth transfer

3
New America Work on Workplace Asset Building

• AutoSave
• Automatic enrollment into and payroll deduction
  for savings account that is neither
  use-restricted nor tax-advantaged, i.e., can be
  used for emergency and near-term needs
• Working on pilot design with MDRC, funded by
  Rockefeller Foundation
• Workplace Financial Education
• Field research plus questionnaire by Lew Mandell
  of University of Washington, funded by Hitachi
  Foundation
• Webinar on September 26 contact Karen Murrell at
  kmurrell_at_higherheightsconsulting.com

4
Asset Challenges for Low- and Moderate-Income
Workers

• Concern about living paycheck-to-paycheck pushes
  toward immediate income maximization, often at
  cost of longer-term stability
• Part-time and seasonal work, multiple jobs result
  in worst of two worlds ineligibility for
  benefits and multiple FICA withholding
• Strong temptation to stay off the books, which
  means no benefits, no Social Security
• Health insurance co-pays and premiums may lead to
  lack of health insurance those without health
  insurance at much higher bankruptcy risk
• For very low income workers, asset limits of
  income-support programs may limit or at least
  discourage saving

5
Standard Workplace Assets Programs Dont Work for
Lower Wage Workers

• Involve locking up money for specific purposes in
  the future conflicts with concern about more
  immediate needs
• Tax benefits are minimal or useless use it or
  lose it feature of flex accounts conflicts with
  need for every penny
• Many of these employees lack financial
  information and understanding that would enable
  them to make effective use of asset-building
  workplace benefits, including direct deposit and
  payroll deduction into a savings account or
  Savings Bonds

6
Why the Workplace Should be A Good Place to Build
Assets

• Its where income is earned, and if money can be
  moved to savings or investment before it gets to
  worker, it has greater chance of being used to
  build assets
• Systems are in place for
• Direct deposit
• Although about 80 of lower wage workers who
  receive regular paychecks have access to direct
  deposit, about 1/3 of those dont use it
• May not be able to get bank account may not want
  one (concern about creditors is one issue)
• Payroll deduction
• Benefits
• Enhancements through matching feasible
• Economies of scale
• Good HR department can maximize utility
• Asset building and asset protecting benefits can
  grow with employee, and can include stock
  ownership and life and disability insurance
• Many workplaces have relationships, often
  on-site, with a credit union or bank

7
Financial Education In the Workplace

• Opportunity is great
• Workers spend a good deal of time there
• Relative homogeneity of workforce should make
  focus more feasible
• HR departments and other resources (e.g. EAP
  programs) available
• On-the-clock and on-site provision can encourage
  attendance
• But there are serious challenges
• Not viewed as a valued benefit by employers or
  employees even in good programs, take-up rates
  are very low
• Privacy issues, as to both co-workers and
  employer
• Concerns about potential conflicts of interest
  when free education is provided by those who
  also have products to sell, including asset
  management (and even when these providers are
  good, they have little interest in lower-wage
  workers)

8
Challenges to Overcome with Employers

• Many large employers of low-wage workers regard
  high turnover as a cost of doing business, and
  are not interested in providing benefits those
  value is felt only over the long term or through
  retention
• Concern that encouraging low-wage workers to save
  outside of a retirement plan will place
  retirement plan at risk of violating ERISA
  top-heavy or non-discrimination rules
• Have employers who moved to opt-out retirement
  plans (and thus are exempt from to-heavy rules)
  checked the savings box, leading to lack of
  interest in other types of employee
  asset-building strategies?
• GAAP accounting can make broad-based employee
  stock option plans expensive for larger companies
  even though there is no cash payout

9
Assets in the Workplace

• Ellen Seidman
• Director of Financial Services Policy
• Asset Building Program
• New America Foundation
• seidman_at_newamerica.net
• Invitational Business Roundtable
• 2008 Assets Learning Conference
• September 11, 2008