Your workforce is the engine of your co-op’s success. But while your team members are doing their jobs, who is helping them with their financial needs?
Co-op executives often tell us they want to do more to support and strengthen their employees by helping them reduce financial stresses and build wealth for their futures.
The Employer-Sponsored Savings Program is a simple, low-cost way for co-ops to encourage employees to save. The co-op provides the motivation, by supplementing saved funds up to a level the co-op is comfortable supporting. Homestead provides the investment vehicles and educational resources to help employees start or continue saving and select an appropriate mix of funds as needed. As always, Homestead will provide account administrative support along the way.
How the Program Works
The program is simple to set up with a few defined steps for all parties. More details are available in this brochure.
|Determines the terms of the program, such as match amounts and account verification requirements||Assists the co–op with setting program terms that can be successfully implemented|
|Determines if the co-op will put payroll deductions into a mix of funds as directed by each employee or will limit the deductions to the Daily Income Fund for simplicity||With the co-op’s permission, hosts an all-employee initial rollout meeting to speak about the program, educate on the importance of savings and walk through the steps to open accounts online|
|Informs employees and promotes the program internally, and provides Homestead with a list of names and email addresses for employees who want to participate||Contacts participating employees and provides them with Homestead Funds information and instructions on opening an account|
|If the co-op wants to receive account balances, enters into a confidentiality agreement with Homestead||Tracks the employees’ consent to share information if the co-op wants to verify account balances and/or redemption activity annually|
|Sets up employee payroll deductions using Homestead’s instructions||Provides employee account balances and/or redemptions to the co-op annually, if necessary|
|Sets up employee payroll deductions using Homestead’s instructions||Communicates to the employee about additional Homestead resources to build a diversified portfolio|
Once program details are determined, we recommend that cooperatives review them with their legal counsel and tax
advisors as Homestead Funds does not offer legal or tax advice. In our experience, it takes approximately two to three months to implement the program.
As a money market fund, the Daily Income Fund has limited potential for income production. You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
Establishing Participant Accounts
Once an employee assigns regular contributions via payroll deduction, the cooperative makes matches according to designated match limits and program rules. Additionally, the cooperative can set a holding period to earn the match.
Homestead Funds issues a taxable account in the employee’s name, whereby the employee holds full ownership and access to funds. To provide ongoing education and support, Homestead works to:
- Boost employee awareness of the need to build adequate savings
- Help employees with asset allocation decisions based on their specific goals
- Provide planning and asset allocation resources to turn existing savings account into a diversified investment portfolio
Important Note: An Employer-Sponsored Savings Program invested in Homestead Funds is not a qualified plan and has no relation to any retirement plans that may be offered by the cooperative.
Asset allocation and diversification do not guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.
See the Case Study