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After-tax emergency savings in retirement plans can help workers build a safety net

2019-02-25 13:00:00

NEWARK, NJ, February 25, 2019 – As America Save Week kicks off February 25, Prudential Financial, Inc. (NYSE: PRU) calls on employers to consider adding an after-tax emergency savings feature to their 401 (k) plans to help employees save for unexpected expenses.

The partial government shutdown earlier this year put the need for emergency austerity in the national spotlight as nearly half of affected federal workers lagged behind in paying bills and 83 percent reported higher overall stress levels, a 2019 Prudential survey1 found it. In conjunction with earlier Research2 that found that most Americans can't handle a $ 500 emergency, the benefits of an emergency saver feature are clear.

"A missed salary, or even an unexpected auto repair, can really get Americans into financial trouble," said Phil Waldeck, president of Prudential Retirement. “There is a real opportunity in the workplace to address not only Americans' long-term savings needs, but also their short-term savings challenges. And we find that post-tax contributions are within the 401 (401). k) plan can help solve this challenge without compromising pre-tax retirement savings. "

Only 26 percent of Americans are on track to build an emergency savings account, Prudential & # 39; s Financial Wellness Census 2018 found. Certain populations are particularly vulnerable. For example, since Military Saves Week coincides with America Save Week, Prudential's census found that only 15 percent of Millennial and Gen X veterans are on their way to building an emergency savings account.

After-tax contributions are the least used of the three retirement savings options available to most private sector employees, including pre-tax contributions and a Roth 401 (k) option. Only 14.6 percent of employers offer an after-tax savings option within their 401 (k) plan, according to data from the Plan Sponsor Council of America 2016.

Recognizing this need, Prudential Retirement introduced an emergency savings feature in 20183 for Workplace 401 (k) plans to provide employees with the option to pay wage contributions in addition to pre-tax premiums.

This feature allows employees to withdraw their after-tax savings in an emergency, while preserving pre-tax retirement contributions.

All income recognized is subject to tax and an early distribution tax of 10%, if recognized before the age of 59½.

Prudential has been offering its own employees an after-tax savings feature through the 401 (k) plan, along with tax and Roth 401 (k) contribution options.

“We are committed to providing a highly competitive benefits package that improves the well-being of our employees. Financial wellness is an essential part of this, ”said Andy Gregg, Prudential vice president of employee benefits. "We recognize that our employees have different savings challenges, so we offer a savings plan with flexible options, including the after-tax option."

Savings are critical to financial wellbeing

As part of Prudential Retirement & # 39; s holistic financial wellness offering, the emergency savings feature provides employees with an alternative to savings and investment accounts outside of the workplace. It also helps to stop the outflow of pre-tax premiums. Linking emergency savings to an employer-sponsored retirement plan offers other benefits, such as no minimum account balance and potentially lower investment costs than an employee could afford at a real estate agency.

About prudential pension

Prudential Retirement provides retirement solutions for public, private and non-profit organizations. Its services include tracking of defined contributions, defined benefits and non-qualified deferred benefits, clerical services, wealth management, comprehensive employee training and communications, and trustee services, as well as a variety of products and strategies, including institutional investments and income products, retirement risk transfer solutions and structured settlement services.

With over 85 years of retirement experience, Prudential Retirement helps meet the needs of 4.4 million members and annuitants. Prudential Retirement has $ 432.4 billion in retirement account values ​​as of December 31, 2018. Retirement products and services are provided by The Prudential Insurance Company of America (PICA), Newark, N.J., or its subsidiaries.

About Prudential

Prudential Financial, Inc. (NYSE: PRU), a leader in financial services with more than $ 1 trillion in assets under management as of December 31, 2018, has operations in the United States, Asia, Europe and Latin America. Prudential's diverse and talented employees are committed to helping individual and institutional clients grow and protect their assets through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and asset management. In the US, Prudential's iconic Rock symbol has stood for strength, stability, expertise and innovation for over a century. Visit news.prudential.com for more information.


1Financial Vulnerability: How the government shutdown affected government employees' household finances, Prudential Financial, Inc., February 2019

2Improve financial security with workplace savings, Prudential Financial, Inc., July 2018

3 Press Release: "Emergency Savings Feature Can Help Sponsors Plan to Increase Employee Financial Well-Being," Says Prudential, July 2018, 1004721-00001-00

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