Retirement plans aren’t the beginning and end of retirement benefits, nor are they the entire universe of retirement readiness. Plan Sponsors may want to consider if there are options in their benefits offerings that interns can opt for, and if so, which might be best suited to those entering the workforce. The most obvious answer to this question might be emergency savings accounts.
According to best-selling author James Clear, “your life today is essentially the sum of your habits.”[1] In other words, understanding how to create one habit might help with creating other, similar habits. Many employers have begun offering employee wellness benefits to their student and intern workers. Yet, some elements of those wellness programs, such as financial wellness components around retirement planning, may not be available to interns.
Employers that are plan sponsors may want to help their participants with retirement readiness and may encourage early active participation in a retirement plan. Maybe even, internship early.
Experts note the importance of formation in creating positive habits. “‘Positive habits don’t just boost your self-esteem, either. They can also reduce stress and anxiety by offering a degree of structure and predictability to your everyday life,’ explains Elizabeth Barlow, a licensed independent clinical social worker in Massachusetts, West Virginia, and founder of Barlow Counseling Group.”[2] Many workers new to employment may have considerable anxiety around financial security. Based on Barlow’s statement, a small habit such as taking part in a retirement readiness benefit could reduce overall financial anxiety.
Plan sponsors may have already considered whether they can extend participation in their plan to interns and student workers. In fact, we’ve covered this question before. But a slightly different question might be, if a plan sponsor wanted to help create strong retirement savings habits in their newest recruits, what are their options? The good news is that isn’t a rhetorical question.
First, by way of refresher, some plans in some situations may allow for some participation by some interns. If an intern is treated as an employee, then the question may fall to the terms of their employer’s retirement plan. Whether a student or intern is considered an employee calls for a different analysis, involving the Fair Labor Standards Act and what the Department of Labor calls the “economic reality” test. Those questions require conversations with counsel and human resources and are not the subject of this article.
Second, it might be tempting to assume that interns are merely seasonal or temporary workers who under new provisions in the Secure 2.0 Act may now be eligible for retirement benefits. But that’s a dangerous assumption. “[S]easonal employees and temporary employees are defined differently by important regulations. For example, the ACA defines a seasonal employee as one who works for six months or less at around the same time each year. But interns, consultants, or IT specialists who are hired for specific projects wouldn’t be considered seasonal.”[3] All of which means, merely assuming an intern working more than 30 hours a week for several months should qualify for participation in a company’s retirement plan.
But retirement plans aren’t the beginning and end of retirement benefits, nor are they the entire universe of retirement readiness. Plan Sponsors may want to consider if there are options in their benefits offerings that interns can opt for, and if so, which might be best suited to those entering the workforce. The most obvious answer to this question might be emergency savings accounts.
In fact, many employees have begun asking for emergency savings accounts as part of their job benefits. News reports from 2023 noted that for the first time in four years “saving for retirement is not the primary financial stress factor for employees.”[4] And, some provisions of the SECURE 2.0 Act make it easier for employers to create those accounts. Out of plan emergency accounts can be offered to interns and part-time workers. In some circumstances, this may include those that have an employer match.[5] While out of plan emergency savings accounts may not have the tax advantages that their in-plan versions have, they don't require ERISA compliance.[6]
[1] https://jamesclear.com/three-steps-habit-change#:
[2] https://www.healthline.com/health/mental-health/why-are-habits-important#learning-new-habits
[3] https://www.experian.com/blogs/employer-services/aca-and-seasonal-employees
[5] https://www.indeed.com/career-advice/news/employer-matched-emergency-savings-accounts
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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