M1 Blog

High-Yield Cash Accounts: An Employee Benefits Option

M1 Team
M1 Team September 6, 2024
Blog, woman on laptop at picnic table

In today’s challenging economic climate, balancing competitive employee benefits with budget constraints can be daunting. High-Yield Cash Accounts (HYCAs) are a financial product that some companies are considering as part of their benefits package. This article aims to provide information about HYCAs and how they might fit into an employee benefits strategy.

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The Current State of Employee Benefits and Savings Accounts

The economic landscape presents various challenges for both employers and employees. Traditional employee savings accounts often offer minimal returns, which may not keep pace with inflation. These factors underscore the need for innovative benefits solutions that can provide value to both employers and employees.

High-Yield Cash Accounts: An Overview

High-Yield Cash Accounts typically offer higher interest rates compared to traditional savings accounts. Here’s a general comparison:

Account TypeTypical APY Range
Traditional Savings Account0.42%1
High-Yield Cash Account5.00% APY2
(4.50% APY2 after 3 months)
1 National average savings account interest rate source: FDIC, as of May 1, 2024.
2 Stated APY (annual percentage yield) with the M1 High-Yield Cash Account is accrued on account balance. Obtaining stated APY requires a minimum initial deposit of $100. APY is solely determined by M1 Finance LLC and its partner banks, and will include administrative and account fees that may reduce earnings. Rates are subject to change without notice. M1 High-Yield Cash Account is a separate offering from, and not linked to, the M1 High Yield Savings Accounts offered by M1 Spend LLC’s banking partner. M1 is not a bank.

M1 HYCA vs Traditional Savings Accounts

M1 HYCAs offer several features compared to traditional savings accounts:

  1. Higher interest rates
  2. No minimum balance requirements
  3. FDIC insurance (up to $3.75M)
  4. Online access and management

Potential Considerations for Employees

When considering a HYCA, employees might think about:

  1. Savings Goals: HYCAs could potentially offer higher returns for short-term savings goals.
  2. Financial Wellness: HYCAs may provide an option for building emergency funds.
  3. Flexibility: HYCAs often allow easy access to funds, which could be useful for various financial needs.

Implementing HYCAs: Potential Approaches

If considering implementing HYCAs as part of a benefits package, here are some potential steps:

  1. Introduce During Open Enrollment: Present the HYCA as a new benefit option, clearly explaining its features and any limitations.
  2. Educate Employees: Host informational sessions to explain how HYCAs work, including any restrictions on withdrawals or minimum balance requirements.
  3. Integrate with Financial Wellness Programs: Consider combining HYCA offerings with existing financial education initiatives.
  4. Offer Automatic Contributions: Consider setting up automatic payroll deductions to facilitate regular contributions.
  5. Address Potential Questions: Be prepared to answer questions about account features, the impact on existing benefits, and how the HYCA fits into overall financial planning.

Exploring Innovative Employee Benefits Solutions

As the employee benefits landscape evolves, options like High-Yield Cash Accounts present potential opportunities to enhance benefits packages. However, it’s crucial to remember that HYCAs are just one piece of a comprehensive financial wellness strategy.

Frequently Asked Questions About High-Yield Cash Accounts

Are High-Yield Cash Accounts safe?

M1 takes measures to protect your funds in a High-Yield Cash Account:

  • FDIC insurance protects your deposits if the financial institution fails
  • FDIC Insurance: M1 partners with FDIC-insured banks to provide up to $3.75 million in FDIC insurance through a deposit network
  • SIPC Protection: Brokerage funds are protected by SIPC up to $500,000, which includes a $250,000 limit for cash

How is HYCA Interest Calculated and Paid?

M1 uses the daily balance method to calculate interest on your HYCA:

  • Interest rate applied to principal amount daily
  • Interest compounded and credited monthly
  • Hypothetical example: $10,000 in HYCA with 5.00% APY1 could earn approximately $41.67 in the first month (30-day month), assuming rates remain constant
  • Added interest allows for compound growth
  • APY subject to change without notice

How do HYCAs fit into a broader employee financial wellness program?

HYCAs can be one component of a comprehensive financial wellness program, potentially complementing other initiatives like financial education workshops or retirement planning assistance.

Conclusion

High-Yield Cash Accounts offer a potential avenue for enhancing employee benefits packages, providing an opportunity for employees to earn higher returns on their savings. While they come with their own set of considerations and potential limitations, HYCAs can be a valuable addition to a comprehensive financial wellness program.

As an HR professional, it’s crucial to thoroughly research and understand the implications of offering HYCAs as part of your benefits package. Consider consulting with financial advisors and legal experts to ensure compliance and maximize the potential benefits for your employees.

For more information on how M1 High-Yield Cash Accounts could fit into your employee benefits strategy, click here.

Disclaimer: M1 Finance LLC is a SEC registered broker-dealer and member FINRA/SIPC. This content is for informational purposes only and does not constitute financial advice. Consider your individual financial circumstances and consult with a qualified financial advisor before making any financial decisions. The information provided in this article is for general informational purposes only and should not be considered as financial advice. Interest rates may change, and past performance does not guarantee future results. Individuals should carefully consider their financial circumstances and consult with a qualified financial advisor before making any financial decisions. M1 is not responsible for any financial decisions made based on the information provided in this article.

M1 Finance LLC is a SEC registered broker-dealer and member FINRA/SIPC (CRD #281242). For more information about M1, please visit FINRA’s BrokerCheck.

M1 is not a bank and M1 High-Yield Cash Accounts are not a checking or savings account. M1 High-Yield Cash Accounts are an investment product offered by M1 Finance, LLC, an SEC registered broker-dealer, Member FINRA / SIPC. The purpose of High-Yield Cash Accounts are to earn interest on secuirties not actively invested. An open M1 Investment account is required to participate in the M1 High-Yield Cash Account.

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