Eight out of the nine recordkeepers are either thinking about offering an emergency savings product or already do so, the report found. Those that do are evenly split between in-plan and out-of-plan products. Of those that don't, the majority are considering out-of-plan options, according to the report, although some are considering offering both.

The benefits of an in-plan solution are easy implementation for sponsors, payroll integration and the potential impact it could have for low- to medium-income employees, recordkeepers say, not to mention the prospect of increasing participation in the retirement plan, the report found.

There are significant challenges to an in-plan offering, though, including confusing participants with mixed savings messages, compliance and tax implications, and a poorer user experience overall.

A solution offered outside the plan can be implemented faster, according to the report, as well as portability between employers and the potential to integrate other engaging product features.

However, fees for these products can be significant. One recordkeeper interviewed said that third-party fees charged to users prevented the company from engaging with an out-of-plan product provider.

The report also found that recordkeepers that don't have a retail line of business are subject to new regulatory burdens when they offer a retail savings product.

Some of those burdens can even be counterproductive, such as Know Your Customer regulations that ask for user information at sign-up and could prevent participants from utilizing the offering.

"While the seven plan sponsors we interviewed recognized the importance of emergency savings, they had varying opinions on what actions they should take to encourage employees to save for emergencies," Commonwealth wrote in the report.

Plan sponsors lean toward offering in-plan options, the report found, but had many of the same concerns that recordkeepers did, particularly around implementation, taxes and penalties, and confusing messages for participants.

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Most plan sponsors are providing education and messaging about the importance of saving, according to the report, including how much to save and the benefits of automated savings.

All the sponsors surveyed by Commonwealth said they have considered dedicated emergency savings benefits, with half saying they will likely offer such a product through their recordkeeper or credit union.

Commonwealth encourages sponsors and recordkeepers to consider behavioral finance when selecting and implementing savings products. As the report noted, "offering quality financial products and resources is in some ways the easy part—ensuring that employees use and benefit from those products and services is the vexing challenge."

Sponsors identified four considerations that affect their decision to implement an emergency savings tool for their employees.

Fiduciary responsibilities. Sponsors are worried about the implications of allowing their recordkeeper to cross-sell retirement and emergency savings products. They also cited concerns about rates of return and fees that employees would have to pay.

Impact on engagement. Prize-linked savings (PLS), gamification and automation help sponsors create immediate or near-term benefits that reward current behavior.

Cost. Some sponsors have fixed budgets for what they can offer their employees, while others were less concerned about overall costs, the report found.

Vendor ecosystem. Almost half of sponsors would rather work with a current vendor instead of incurring a new expense and additional workload of engaging a new provider, and introducing a new platform for employees to familiarize themselves with.

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