Generally lax savings habits of most U.S. workers, coupled with creative product development by some financial services firms, have given rise to a new investment program allowing workers to set aside after-tax dollars through payroll deduction.
American Express Co., Minneapolis, has launched Investing at Work, in which workers can invest - through automatic payroll deduction - in its family of loaded mutual funds or 250 outside no-load funds. CIGNA Corp., Hartford, Conn., also has a similar after-tax investment program.
Investing at Work is designed to supplement employer-sponsored retirement plans by providing alternate ways for employees to save, even though it is with after-tax dollars. It also provides access to financial advisers through a special toll-free telephone link, similar to a 401(k) voice response system.
Lands' End Inc., Dodgeville, Wis., will be the first company to adopt the American Express investment plan. It plans to roll out the program to its 6,000 employees in November, said Sharon Hennessy, benefits manager.
Lands' End has a $49 million 401(k) plan with nearly a 90% participation rate. She said Investing at Work will offer employees another way to save for retirement, or for other needs.
The after-tax savings program also might aid companies that run into anti-discrimination limitations in their 401(k) plans.
Edith Philippi, director of business development at American Express Retirement Services, said the program also could reduce the need by participants to take out loans from their 401(k) plans.