Benefits and Compensation

6 Innovative 401(k) Options to Consider that Support Employees’ Holistic Financial Wellbeing

401(k) plans have been a staple of employee benefits offerings for decades and are a way for employees to save money for retirement by deferring taxation on contributions. One of the most attractive aspects of a 401(k) is the employer match, which averages around 4.7% of employees’ salaries in the United States and adds substantially to employees’ retirement fund.  

Despite the broad availability and benefits of 401(k) investing, only 41% of workers actually contribute to one, either because they don’t understand the value or because they can’t afford to. 

Fortunately, emerging innovative options offer greater flexibility to support employees’ holistic financial health across different stages in life. These not only help employees manage current demands without sacrificing their retirement but also provide a strong differentiator that helps employers attract and retain talent.  

Financial Coaching

People express many financial pain points, especially with inflation creeping higher. Between crushing student loan debt, a mortgage or rent, medical bills, gas, groceries, and family obligations, it can seem nearly impossible to set aside money for retirement—an event that’s years away—when it feels like the wolves are at your door. 

Offering financial coaching and financial wellness education can help employees balance planning for the future with current demands and get the most out of benefits offered. Making sure they understand what’s available can go a long way toward engaging employees on a path to a more stable financial future. 

Automatic Enrollment 

Rather than waiting for employees to opt in to their plans, about half of employers automatically enroll new employees in a 401(k) as part of the onboarding process. This encourages employees to contribute even a small amount each month toward the fund and enables them to take advantage of the employer match. This helps to prove the value of 401(k) investing, raises awareness of the program, and spurs engagement. In fact, employees who are automatically enrolled start saving sooner, save more, and grow their assets quicker.  

Sidecar Emergency Savings

Over half of Americans are unprepared for a financial emergency, and nearly 40% dipped into emergency savings during the pandemic, with nearly 75% depleting their savings by half or more. If employees do have a 401(k), the temptation is very strong to take an early withdrawal to cover emergencies, which has both a negative long-term impact and immediate tax implications.  

New legislation proposed in the SECURE 2.0 Act that’s slowly moving through Congress would allow companies to auto-enroll employees in an emergency savings fund with up to $2,500 in pretax contribution as part of their 401(k). This will give employees a much-needed cushion without hindering their future retirement savings. 

Even before SECURE 2.0 is finalized, consider offering an auto-deposit savings program for your employees in which a portion of each paycheck (after taxes) is automatically deposited on employees’ behalf. This can provide tremendous peace of mind when it’s needed most. 

Bonuses and/or Unused PTO Contributions

Many organizations already offer PTO accrual programs in which unused time is paid out at the end of each year. Consider upgrading this benefit by giving employees the option to contribute those funds to their 401(k), health savings account, student loan repayment, or a 529 plan—whatever suits their needs. By giving staff a wider variety of options, you can satisfy a broader range of concerns for more employees. 

Student Loan Payment Diversion

Student loan debt is a huge burden for millions of Americans, even with forgiveness potentially forthcoming. Repayment is set to resume on January 1, and for many, it’s hard to even consider paying into retirement when they’re still struggling to pay off college. 

The Abbott Labs Freedom 2 Save program provides a successful model for employees to divert their minimum required 401(k) contribution to paying down student loans while still earning the company contribution to their 401(k) account. This allows employees to attend to their financial needs at both ends of their career simultaneously. Abbott received a private letter ruling from the Internal Revenue Service (IRS) permitting it to offer this program, and some companies have copied it based on that ruling. But Congress is now considering broader approval for a similar plan within the SECURE 2.0 legislation, and if it passes, it will open this option up for more companies.  

Automatic Deferral Rate Increases

  1. As employees near retirement, their priorities often shift—they may have less debt, their kids are grown, and they’re looking to pad their nest egg.  

Offering automatic increases to employees’ 401(k) deferral rates can help them save more by increasing the percentage of their salary that goes into their 401(k) over time. In this program, the proportion would increase when they reach specific ages, every 5 years, or some other interval set by the employees. As their salary would presumably increase over that time, the company’s match would increase, too, accelerating savings at a pivotal time in their career. 


Providing a wide range of financial solutions can help employees build a financial health buffer so they have more options besides draining their retirement fund if a crisis strikes. Companies can work with existing financial partners—their 401(k) recordkeepers, for example—to ask for innovative options and leverage existing resources to educate employees.  

Offering a wide array of options sends a clear message to both current and prospective employees that the company is concerned about its workforce’s holistic financial well-being. It also signals that the company understands employees have unique needs at different stages of life and is a trusted source for information and products to build a better financial future. 

Barrett Scruggs is SoFi at Work’s Vice President, serving as a loyal partner to a community of 900+ employer partners. SoFi at Work is a holistic financial well-being benefits platform offering a suite of services, tools, insights, and educational resources tailored to address each workforce’s unique and evolving needs. Scruggs graduated from West Point and served 5 years in the Army before making the transition to corporate banking. In his role at SoFi, he oversees a team of consultative employee financial well-being professionals who design and deliver SoFi at Work’s solutions through on-demand, digital interventions for employers across the United States.

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