Leveraging Innovation to Impact the Financial Lives of Employees: Lessons from the Ground

1. Leveraging Innovation to Impact the Financial Lives of Employees: Lessons from the Ground Webinar Rachel Schneider, Innovation Director October 22, 2009 ©CFSI, 2009. Not for distribution

2. Leveraging Innovation to Impact the Financial Lives of Employees • Employers can be an unparalleled distribution channel for financial services • Strong incentives to help employees achieve financial success • Scale • Position of trust • Built-in infrastructure that can be leveraged to offer new information and services

3. Webinar Agenda: Lessons from the Ground • Financially Fit Minnesota • Liz Swanson, Vice President, Human Resources • HealthPartners • SafePay • Eugénie FitzGerald, Project Consultant • San Francisco Office of the Treasurer • AutoSave • Alejandra Lopez-Fernandini, Asset Building Program • New America Foundation • Ryan Zilker, Vice President, Marketing and Human Resources, American First Credit Union

4. Financially Fit Minnesota October 22, 2009

5. INTRODUCTION TO THE ITASCA PROJECT What is Itasca Who is Itasca • An employer-led alliance to drive regional efforts to keep the Twin Cities’ economy and quality of life competitive with other regions • 50-plus community leaders • Primarily private sector CEOs • Includes a handful of public sector leaders, such as Governor of Minnesota, Mayors of Minneapolis and St. Paul, Chair of Met Council, leaders of University of Minnesota and MNSCU, and Presidents of Foundations More information available at www.TheItascaProject.com 5

6. HOW ITASCA IS ADDRESSING REGIONAL COMPETITIVENESS Task forces to date • Participants agree on priority issues • An individual CEO takes the leadership on each issue and assembles a task force • Task forces identify a unique role for Itasca, typically working in partnership with scores of organizations around the region • Advancing a Comprehensive Transportation Plan • Building Financial Fitness • Creating a World-Class K-12 Education System • Improving Early Childhood Education • Retaining and Growing Leading Employers • Setting Regional Performance Indicators • Strengthening University-Business Partnerships • Supporting the Growth of Small Business • Supporting the Strategic Re-Direction of Minneapolis Public Schools • Understanding and Addressing Socioeconomic Disparities 6

7. FINANCIALLY FIT MINNESOTA EXECUTIVE SUMMARY • The Brooking Institution’s “Mind the Gap” report*, commissioned by Itasca, highlighted disparities in financial well-being and recommended a focus on improving financial literacy • Further research revealed that families in Minnesota and throughout the U.S. are increasingly engaging in unsound financial behavior, with particularly dire consequences for low income families • In response, The Itasca Project launched Financially Fit Minnesota in April 2008, which asks companies to commit to increasing participation rates in direct deposit and retirement – and to close the gaps between employee groups * Report is available at: http://www.unitedwaytwincities.org/CommunityInfo/closethegap.cfm 7

8. WHAT ARE THE FINANCIALLY FIT MINNESOTA GOALS AND STRATEGIES? Goal • Improve the region’s financial fitness • Strategies • Use employer’s unique position with employees to encourage banking and saving • One-on-one recruitment to establish strong pacesetter contingent, and then expand effort to other employers • Measure results to keep focus on goal and improvement Progress is being measured by improvement in the employee participation rates in direct deposit and employer sponsored retirement plans. 8

9. WHO IS CURRENTLY INVOLVED IN FINANCIALLY FIT MINNESOTA? 28 employers representing over 210,000 Minnesota employees 9

10. WHAT ARE WE ASKING FROM FFM EMPLOYERS? 1 2 3 • Set a goal for organization to increase employee participation in direct deposit and/or retirement savings, with a focus on closing gaps between employee groups; implement initiatives to achieve goal • Report direct deposit and retirement plan participation data by age, salary, and ethnicity cohorts on quarterly basis • Leadership Council meetings quarterly • Best practice/case study presentations • Project updates and input • Affinity group discussions • Networking 10

11. HOW ARE WE DOING?IMPACT ON DIRECT DEPOSIT Participation rate in direct deposit Percent • Direct deposit • Participation rates have increased by 2.3% • Progress has been made in the younger, lower paid, and minority categories • There are about 3,500 additional employees using direct deposit Baseline June 30 Note: Data is submitted quarterly by most of the participating companies allowing the tracking of progress towards the total goal as well as progress in closing the disparities in participation rates . Source: Pacesetter data collection 2008-09 11

12. HOW ARE WE DOING?IMPACT ON RETIREMENT SAVINGS Participation rate in retirement savings Percent • Retirement plan • Participation rates have increased by 5.2% • This equates to about 8,200 additional employees participating in employer-sponsored voluntary participation retirement plans • Six companies are also tracking the net number of employees who have increased their retirement plan deferral percentage. They are reporting the net number increasing as 975 employees Baseline June 30 Note: Data is submitted quarterly by most of the participating companies allowing the tracking of progress towards the total goal as well as progress in closing the disparities in participation rates Source: Pacesetter data collection 2008-09 12

13. EACH COMPANY HAS DESIGNED THEIR FFM APPROACH DEPENDING ON THEIR NEEDS AND STARTING POINT Examples Goal Tactics • Increase participation in retirement plan, with focus on retail employees • Auto-enroll all new and current employees in 401(k) • 100% participation in direct deposit • Implement pay cards for employees who don’t have banking relationship • Require new hires to use DD or pay cards • Targeted campaign to move existing employees • Increase participation in direct deposit • Increase participation in retirement plan • Will use employee research to drive marketing communi-cations and resources that will increase participation rates • Switched to 401(k) auto-enroll for all employees 13

14. LESSONS LEARNED ABOUT WHAT WORKS The employer must see the value in playing this role with it’s workforce and be committed to improving participation CEO involvement makes a difference Though many employers have high overall participation on direct deposit and retirement, most found significant gaps when considering participation by age, income level, or ethnicity One size doesn’t fit all – each approach has been unique It doesn’t have to be a costly campaign, you just have to be creative 14

15. EFFECTIVE STRATEGIES TO INCREASE DIRECT DEPOSIT AND RETIREMENT Brand the effort and align it with the goals of the organization so that employees know this is important to the company Know what motivates your audience and use that information to incent participation; start with employee research if necessary to build the understanding Consider both benefit design changes (e.g, pay cards, auto-enroll) and communication tactics Engage leaders and line managers to deliver the message (not just HR!), and reward the leader whose department is most successful during the campaign Segment your audience to tailor the messages (e.g. Gen Y vs. Traditionalists) Talk to employees to learn what the participation barriers are, and then address those barriers Bad credit? There are now ways to participate even with bad credit No bank account? Our banking partners will help – and even reward you for opening an account Lack of trust? Use data to illustrate how safety of these systems 15

16. THOUGH THE ECONOMIC ENVIRONMENT HAS SHIFTED DRAMATICALLY, THE PRINCIPLES OF FFM ARE STILL RELEVANT Financial fitness is more important than ever before Employers are still in a position of leverage to assist their employees’ move towards financial fitness Americans will need to provide for a significant portion of their own retirement funding Employer matches of retirement saving remains “free money” to help employees prepare for retirement Saving sooner rather than later makes goal attainment easier When the economy recovers, investment returns could reach unprecedented favorable levels Withdrawing retirement funds to support daily living expenses should be one of the last resorts People are likely more focused on the need for solid financial management decision-making than they were one year ago Direct deposit benefits to the employer and the employee are still available 16

17. Visit our website to see the information and resources we have assembled for Minnesota employers http://www.financiallyfitmn.org/ 17

18. Questions

19. SafePay Eugénie FitzGerald, Project Consultant San Francisco Office of the Treasurer ©CFSI, 2009. Not for distribution

20. What is SafePay? Goals of the Initiative Bring low income and under-banked people into the financial mainstream and away from predatory fringe financial services Build an employer pipeline for financial empowerment. Employers can build off their role in healthcare and retirement to assist with personal financial education How Shifting employers to 100% Direct Deposit Improving access to appropriate financial services, products, processes and education Leveraging the power of City Hall and the success of Bank On to make this initiative succeed, becoming the first paper paycheck-free city in the United States

21. San Francisco Employer Research • Surveyed 210+ businesses: • Sample had a representative mix of companies - 55% less than 50 employees, 30% 51-500, 15% 501+ • Combination of online and phone survey • 80% offer Direct Deposit, 20% do not • 20% of respondents had 100% take-up of direct deposit • Small employers • Were the majority of employers not offering direct deposit • 66% of small employers, however, did offer direct deposit

22. Whether an Employer Offers Direct Deposit is highly correlated with payroll process…

23. … with industry

24. …and correlated to the percentage of low-wage workers

25. Employers Not Offering Direct Deposit • 95% of businesses not offering direct deposit are small. • Top obstacles: • Preference for paper checks • Additional cost for direct deposit • Lack of employee interest • Top motivations to switch: • Employee satisfaction • Cost savings • Environment/greening

26. Employers Offering Direct Deposit • General: • 94% offer direct deposit to all employees • 86% do not have challenges with direct deposit • Of the businesses with full participation in direct deposit 30% have direct deposit as the default option and 45% mandate direct deposit • Top identified resources required to achieve 100% participation: • Employee education assistance • Payroll cards • Set up bank accounts

27. Key Next Steps • Payroll card product • RFI issued, submissions due Nov 4th • Employer input • 2 Employer Input Groups are being convened, so both employers offering DD, and those only offering paper checks can co-design implementation • This will inform product development including an online toolkit • Focus groups with employees • Payroll product development

28. Questions

29. AutoSave:Leveraging the Workplace and Behavioral Economic Insights to Increase Savings Alejandra Lopez-Fernandini CFSI Webinar Thursday, October 22, 2009

30. Agenda • Introductions • AutoSave Concept • AutoSave Pilot • Implementing Partner: American First Credit Union

31. Pilot Roles

32. AutoSave: The Concept • Automated, regular savings to a non-restricted use account (for short-term or emergency savings) • Initiated at the workplace in a streamlined process • Low-cost benefit leveraging existing payroll infrastructure (direct deposit)

33. AutoSave: The Pilot • GOAL: • To introduce an automatic savings plan in the workplace specifically intended for accessible, shorter-term savings purposes using behaviorally-informed concepts and features. • PROCESS: • Use existing tools (payroll infrastructure and ability to direct deposit and split pay) to minimize implementation costs and burden to employers and financial institutions

34. AutoSave: The Pilot • Two Stages • 6 to 9 month pilot for operational feasibility (current stage) • 2 year demonstration for impact (potential next stage) • 5 Employers • Southern CA distribution warehouse for national drugstore chain • Small nonprofit provider of voc. training & computer refurbishing • For-profit school meal catering enterprise, recently expanded • Two large municipal employers, located on the E. and W. Coasts • 5 Financial Institutions • 2 banks; 3 credit unions

35. Potential Benefits for Employers • Increase employees’ use of direct deposit • Emergency savings could allow employees to cover the costs of — or even prevent — emergencies that can interfere with work (such as a short-term loss of child care or transportation) • Offering an AutoSave plan as part of a benefit package may make an employer more competitive in attracting workers, at minimal or no cost. • Participating in a savings plan may help to foster future-oriented thinking and financial behavior among employees — potentially strengthening job engagement. • Accounts are owned and held by the employee, thus the employer has no liability for or management of the funds.

36. Contact Us! • New America Foundation • Alejandra Lopez-Fernandini • lopez@newamerica.net • 202-596-3357 • http://www.newamerica.net/programs/asset_building/autosave • MDRC • Caroline Schultz • Caroline.Schultz@mdrc.org

37. AutoSave:Leveraging the Workplace and Behavioral Economic Insights to Increase Savings Ryan Zilker American First Credit Union CFSI Webinar Thursday, October 22, 2009

38. The Opportunity • American First Credit Union membership is offered as an employee benefit at more than 100 employers; • Partner approached AFCU to work with AutoSave; • Test the program with warehouse employees located within 1 mile of branch.

39. Challenges • Average pay approximately $12/hour • Large bilingual contingency • Cash-based, unbanked • All-or-nothing direct deposit policy

40. All employees are eligible. Automatically save! ACME Company Access your moneyanytime… …fully insured…

43. Questions/Concerns • “I already have a checking account at ABC Bank, can I still open an AutoSave account?” • “How can I access my money if I need it?” • “I don’t have a checking account; what about the rest of my paycheck?”

44. Ryan Zilker Vice President, Marketing and Human Resources rzilker@amerfirst.org 562/ 237-5050

45. Questions

46. Save the Date! • Join us in Miami, FL on June 9-11 for the • 5th Annual Underbanked Financial Services Forum The 5th Annual Underbanked Financial Services Forum brings together financial services industry players from across the field, representing banks, credit unions, non-bank financial service providers, nonprofits, regulatory/policy makers, and more to explore opportunities in serving the underbanked market segment—it continues to be the single best place to learn the latest information from the industry’s best and most innovative practitioners. • Highlights from 2009 event: • More than 445 attendees • Speakers representing banks, credit unions, government, nonprofits, nonbank financial services, academic and more! • 3 unique tracks: Credit, Deposits and Payments • Wide variety of networking opportunities ©CFSI, 2009. Not for distribution

47. Rachel Schneider, Innovation Director 212.965.0255 rschneider@cfsinnovation.com The Center for Financial Services Innovation A Nonprofit Affiliate of ShoreBank Corporation 2230 S. Michigan Ave., Suite 200 Chicago, IL 60616 www.cfsinnovation.com ©CFSI, 2009. Not for distribution