The Workplace Benefits Report from Bank of America Merrill Lynch examined the role of financial benefit plans in employers’ talent management strategies and in the overall financial well-being of their employees.
Retaining and Attracting Talent
The importance of retaining and attracting quality employees was at the forefront of most employers’ minds; 94% of employers said it’s important to retain older employees and 98% said it’s important to attract new employees.
BofA Merrill Lynch asked employers why older employees are valuable. Reasons given included their institutional knowledge, sharpened skill set, ability to train new employees, and their relationships with clients. In order to keep these employees at work longer, employers are offering a broader range of benefits than in the past, including flexible or customized work schedules (50%), education around retirement income and health care topics (33%), continuing education and development opportunities (32%), and the opportunity to work remotely (22%).
“Longer life expectancies and Baby Boomers’ desire or need to keep working is leading to an aging population of American employees that will require more age-friendly workplaces and benefit plans designed to meet the unique needs of multiple generations,” said Andy Sieg, head of Retirement Services for Bank of America Merrill Lynch. “HR leaders are playing more strategic roles within organizations seeking to harness the experience and intellectual capital of older employees in order to remain competitive.”Attracting new, younger talent also requires various benefit offerings, but the priorities shift slightly. Employers said health care benefits are most important for attracting new talent (69%), followed by retirement benefits (59%), having a good manager (31%), and flex time (28%).
Employees’ Financial Well-Being
BofA Merrill Lynch found that since the recession, employers are feeling an increased sense of responsibility towards their employees’ financial future. Fifty-nine percent of employers feel an increased sense of responsibility for helping employees meet their financial goals. More than half (53%) feel this responsibility includes providing financial benefit plans, as well as access to financial education and advice.
When asked why they offer financial benefit plans, nearly seven out of 10 (68%) employers cited doing so out of concern for their employees’ financial well-being and 64% said that doing so was part of their company’s core values. Remaining competitive (39%) and helping employees be more productive (39%) are also among the top reasons.
Employers also reported seeing a number of behavioral shifts in terms of how current employees are engaging with their retirement benefit plans. Since the economic crisis:
- Fifty-eight percent of employers find that employees approaching retirement are taking a more active, hands-on approach to their financial benefit plans;
- Thirty-six percent find that younger employees are enrolling earlier into financial benefit plans;
- Twenty-six percent find that employees are contributing enough to receive their full company match at an earlier age; and
- Nineteen percent find that employees are maxing out contributions at an earlier age.
Given the uncertain future of Social Security, and with employers moving away from traditional pension plans, employees may become increasingly reliant on defined contribution plans, such as a 401(k) plan, BofA Merrill Lynch noted. Assuming this trend continues, most employers (75%) anticipate that a greater number of employees will enroll in 401(k) plans or increase their contribution rates. Employers also anticipate increased demand for access to 401(k) saving and investment advice (79%), and that older employees will work longer to extend the benefits of these plans (84%).
Employers are prepared to act on these growing demands, the survey found. When asked whether they plan to enhance the various financial benefit plans they offer during the next two years, many employers said that they are likely to enhance their:
- Defined contribution plans (78%),
- Flexible savings accounts (74%),
- Health savings accounts (72%),
- Non-qualified deferred compensation plans (58%),
- Defined benefit plans (47%), and
- Equity plans (39%).
The Role of Advice
Six in 10 employers are offering access to advice and services that help employees prepare for retirement, according to the Workplace Benefits Report. There is also more education regarding how to pay for health care (51%), understanding investments (41%), using stock options or an equity plan (27%), monitoring progress toward meeting financial goals (27%), and managing day-to-day budgeting and spending (17%).
Some employers are even offering tools to assist employees with managing their personal finances with access to:
- Relevant research or literature to help inform their investment decisions (45%),
- A one-on-one relationship with a financial adviser (39%),
- Intuitive online tools to help them manage their banking and investing (38%), and
- Financial seminars relevant to their life stage (34%).
Frustratingly, employers told BofA that employees are not taking full advantage of these resources. Fifty-nine percent of employers find that less than half of their employees take advantage of the financial education and advice made available to them. When asked why their workforce fails to take advantage of these resources, 54% of employers believe their employees do not view it as relevant to them, or that employees perceive the whole process as too complicated. Forty-six percent believe that their employees may simply be too busy and 23% may not know these resources exist.
When asked how frequently they communicate the broader value of their financial benefit plans to employees, 86% of companies cited doing so just twice annually or less frequently, and 61% provide only basic information about financial benefits when they do communicate. Nearly one-third (31%) of employers admit they could do a better job of communicating the broader value of these offerings to their employees.
BofA Merrill Lynch interviewed 650 C-level executives from April 19-23, 2011. All respondents met the following criteria: 1) offer their employees at least one type of financial benefit plan, 2) total revenue of the business in 2010 was between $5 million and $2 billion, and 3) must have at least 100 employees.