Why Offer a Financial Wellness Program?
Over the last several decades, employers have shifted from providing traditional pension plans to offering 401(k) plans. Although theoretical calculations show that employees who stay the course with their 401(k) plan contributions can accumulate sufficient account balances, most employees do not stay the course. As a result, many Americans are becoming increasingly anxious about their retirement and overall financial wellbeing. Employers are starting to become aware of their employees’ money stresses and want to help, but are not sure how.
Multiple surveys indicate that financial stress and anxiety translates into distracted workers, increased absences and even health issues. Companies have started to recognize that all this worrying about money takes a toll on employee productivity and health in the workplace. To address this, companies are adding financial wellness to their existing employee wellness offerings. Financial wellness is an important aspect of an employee’s overall wellbeing.
Now is the right time to focus on employee financial wellness. Employees are increasingly paying more out of their own pockets for health care expenses and, with the shift to 401(k) plans, they have assumed the risk and responsibility for their own retirement. However, not everyone can afford to hire a financial planner for guidance. With financial wellness programs, employers have an opportunity to step in and offer much-needed assistance.
Financial Wellness Defined
There is no single definition of what employers mean when they talk about financial wellness programs, but there are some common characteristics. Generally, financial wellness is a comprehensive approach that supports an employee’s complete financial picture by looking at how all the pieces of an individual’s financial life fit together.
The goal of a financial wellness program is to enhance the employee’s overall financial wellbeing. To accomplish this, the program ideally should include two steps: (1) creating a workable financial plan (for both the short and long term) and (2) enabling employees to make decisions to manage that plan over time.
Elements of a Financial Wellness Program
Historically, employers have focused on 401(k) plan education and saving for retirement. Financial wellness programs are more holistic, focusing on:
An effective financial wellness program is not a one-size-fits-all. Programs can include group educational sessions, individualized online learning and individual meetings with a financial professional (in person or by telephone).
It is also important to combine financial wellness with 401(k) plan education and design. Employees who do not know how to create a budget cannot understand how to manage and invest their 401(k) plan accounts. The best financial wellness programs include enhancements to the employer’s 401(k) plan, adding features that encourage participation and increased savings, such as auto enrollment and auto escalation.
Employer Considerations
Where to Find Financial Wellness Services
A good place to start searching for a financial wellness provider may be with the recordkeeper for the company’s 401(k) plan. There are also companies who specialize in providing financial wellness programs for employers.
Because the financial wellness provider will have access to employees’ personal financial information, it is extremely important to follow a thoughtful and thorough vetting process. In selecting a financial wellness provider, it is a best practice to complete a request for proposal (RFP), having all the candidates provide written responses to the same carefully crafted questions, along with in-person interviews of the top candidates. Employers should look at no less than three service providers, thoroughly reviewing their services, contracts and costs before selecting their provider. The employer’s benefits counsel is well situated to assist throughout this entire process.
