Changing Messages About Benefits

Plan sponsors can create new communications to engage participants with their retirement and health benefit plans that take into consideration special circumstances caused by the COVID-19 pandemic.

With some workforces going back to the workplace, COVID-19 cases rising across the country, employees feeling financially battered and some forgoing medical care for fear of getting the virus, human resources (HR) and benefits teams have different concerns now than they did in the past. With these issues in mind, many are crafting new messages about benefits.

Christina Cutlip, senior managing director, client engagement and national advocacy at TIAA in Washington, D.C., says employers are deeply concerned about the overall well-being of their employees, from both a health—including physical and mental health—and a financial wellness perspective. They know their employees are going through a difficult period, and they want to help holistically in any way they can. “Our clients are very focused on encouraging their employees to take advantage of existing benefits to address their personal challenges and, now, more than ever, they are looking for their benefits providers to help their employees,” she says.

“The core messages about retirement planning, such as starting to save as early as possible, diversification, focusing on the long-term and the importance of creating a retirement savings and lifetime income plan are just applicable today as they were before the current crisis,” Cutlip adds. However, she suggests that what is needed most today is an expanded employee engagement strategy that takes into consideration what participants have been through. Many participants may have stopped contributing to their retirement plan because of household income losses or illness, or perhaps some simply lost confidence with investing due to market volatility. “In these cases, it’s critical to re-engage with these employees and get them involved again with their financial and retirement planning. The key is delivering relevant content and support that can help participants overcome their present-day challenges, help reduce their financial stress and empower them to take positive steps to improve their long-term financial wellness and retirement readiness,” Cutlip says.

Employers have had to communicate with participants about the Coronavirus Aid, Relief and Economic Security (CARES) Act and its provisions allowing for penalty-free coronavirus-related distributions (CRDs) and expanded loan limits for defined contribution (DC) plans. “At TIAA, we’ve worked closely with our clients to educate their employees about taking a long-term view to market volatility, understanding their options under the CARES Act, limiting retirement plan withdrawals unless it’s a last resort, accessing personalized financial advice and creating a retirement plan that looks beyond today’s challenges,” Cutlip says.

Chad Parks, founder and CEO of Ubiquity Retirement + Savings, headquartered in San Francisco, says his firm expected that requests for distributions from participants would skyrocket during the pandemic, but year-over-year, Ubiquity’s data show requests actually have dropped by 50%. “Our theory is perhaps someone is telling employees who are laid off not to tap into their DC [defined contribution] plan but use it as a last resort,” he says.

In messages to employees who have had their financial situation affected by the pandemic, the first focus should be creating a budget for them—laying out income sources and necessary expenses and seeing if the employee comes out positive or negative, Parks says. If negative, they need help to find cash to bridge the gap. “I’m advocating to use all other resources first, even credit cards, mainly because there’s a triple whammy when taking money from a DC plan. Though the CARES Act waives penalties, taxes on that income will be due. The CARES Act lets them pay back a CRD, but I’d say the odds of that are low. It would be hard to pay it back even over three years. The second whammy is missing out on the compounding of returns. The value could be three to four times in the future than today. And the third whammy is money not in a retirement account is not protected in case the employee has to file for bankruptcy,” Parks explains.

He says the lessons employees should learn from this is they need to have emergency savings and they “need to protect their retirement savings so they won’t face this in the future. What employees are experiencing now is what they will experience in retirement if they are not ready, and they won’t have any backup or way out of it.”

Andrew Meadows, senior vice president of human resources, brand and culture at Ubiquity Retirement + Savings, based in San Francisco, says his firm has received more questions from participants about eligibility for CARES Act provisions, and it has been educating them about that and how to find money in other ways, while at the same time trying to be understanding of what they’re going through.

“We’ve been told by some participants that even though they have the option of taking money from their retirement plan, they feel a level of safety having retirement savings there. They don’t want to touch it,” Meadows says. “Plan sponsors can reinforce the message that retirement savings is for the long term.”

“We throw a lot of choice at people, each asking for a share of employees’ paychecks and it’s not doable for most participants—contribute the maximum you can to your 401(k) and HSA [health savings account], plus you need medical insurance and life insurance, etc. Even people who do well have a hard time doing that,” says Andrew Frend, senior vice president of Product and Strategy for Voya’s Employee Benefits business in Minneapolis.

“The [COVID-19 pandemic] is a reminder that there has to be a holistic plan for people’s finances rather than doing well in one area,” he says.

A Focus on Financial Wellness

Frend says the concept of financial wellness, which has gained momentum over the past decade is just that—a concept. But he says he believes the pandemic has brought clarity to what financial wellness means and ramped up the focus. “Before, it meant a lot of education on a website that helped them understand things or a push to use an advice program, but it means a lot more now than four months ago. It means people being able to withstand a furlough, layoff or salary decrease,” he says. “The rubber has met the road.”

Generally, there has been a rule of thumb to set aside about three to six months of salary in emergency savings to help absorb any unexpected expenses or life changes. Frend says there will be a greater focus on that and a move for employers to play a role in facilitating it. “Employers started a more active role in helping employees be financially well before the pandemic, but it will gain traction now,” he says.

Cutlip says the pandemic has heightened the importance of emergency funds. “As a result, we are seeing more interest in products that enable employees to set up short-term savings to address immediate needs,” she says.

She adds that employers understand that the health—physical and mental—and financial stress their employees are experiencing is interrelated and needs to be addressed holistically. TIAA is seeing more wellness programs covering both aspects.

“There’s value in saving for retirement in an employer-sponsored plan because of the tax efficiency and employer match. It’s a great thing to do, but it’s not the only thing to do,” Frend says. “Employees have health care expenses, they need emergency savings and some voluntary benefits. I think more employers will be looking at helping participants optimize their choices.”

Messages About Health and Voluntary Benefits

Regarding health and voluntary benefits, now could be a good time to push new options. “Now, more than ever, people are open to hearing new ideas and open to trying things such as virtual health care,” says Nancy Reardon, chief strategy and product officer at Maestro Health, an administrator of self-funded health plans, based in Hebron, Connecticut. “We’re recommending that clients focus on and highlight virtual care options. It’s important for those benefits not to be buried in plan design. Create a virtual-first strategy and explain how much it will cost for employees to continue having a conversation with their doctors over the phone.” Reardon says that before the pandemic, there was confusion about getting virtual care because it gets buried in the plan design and people don’t know how much it costs.

She notes that there’s an increasing amount of attention on mental health and well-being. Reardon suggests employers work toward creating a safety zone for that benefit, and show employees that it has to be covered the same as other conditions by law. In the case of mental health, she again suggests highlighting the opportunity to get care virtually. Messages don’t have to get too personal, but employers should create an environment in which taking care of mental health is just like fixing a broken arm. “In messaging, normalize the idea that the mind isn’t separate from body. With COVID, that’s even more important than before,” Reardon says. “Employers should recognize that anxiety has gone through the roof and mental health and well-being is not just about a diagnosis of depression or bipolar disorder. Nothing is wrong with a mental tune-up. I would like to see mental health treated equally to physical health.”

Reardon adds that she believes the problems in the health care system, and the reason costs keep rising as they do, come from a lack of focus on overall well-being—physical, emotional, mental, financial and career. “It should all be treated with the same level of attention and education,” she says.

Reardon says Maestro recommends targeted communication and an educational marketing strategy. “Benefit information should not just be communicated during open enrollment. It’s a 365-day strategy using different modes—email, virtual, webinars and videos,” she says. “Employers know their populations best and there are even regional differences, such as allergy season. There are always opportunities to offer different messages to engage employees.”

Regarding targeted messaging, the COVID-19 pandemic has created more groups to target, Frend says. “For example, those whose incomes have been affected, or a spouse may have been impacted if not the participant—there’s only so much employers know about participants. They will have to think of things they may not have thought about prior to COVID,” he says.

Frend says there is no question there will be a greater use of decision-support tools during open enrollment, adding that those in the market now do a great job of helping people with health plan and voluntary plan decisions. “Health plans are the most expensive [benefits] and the most critical in the minds of employees,” he says. “It’s important to optimize advice at the point of enrollment.”

Frend says employers have a captive audience every year at open enrollment, then there are “moments that matter,” such as having a baby, when employees are paying attention.

Reardon adds that during open enrollment, many employees don’t really pay attention to details of their benefits unless they are in an immediate health situation or know they will have one. “Employees don’t even understand the difference between a retail clinic and emergency room and why they should go to one over the other. Those are the types of communication nuggets all employers should be doing,” she says.

Reardon is on the fence about whether she thinks there will be more use of decision—support tools or personal benefit advisers. “We just went through our open enrollment for benefits effective August 1, and this year, for the first time, we used licensed benefit advisers to guide employees through open enrollment,” she says. “I like the person-based help because you kind of form a relationship and are able to ask difficult or scenario-type questions that not all tools are able to answer.” Reardon says she thinks more employees need more understanding about what benefit package is best for themselves, their families and their financial situations. “It’s the most important decision for employees’ financial and emotional well-being,” she says.

“I’m very passionate about what I call ‘edumarketing,’” Reardon says. “When people are sick, they are expected to shop for health care, but that is when they least want to or feel like it. That’s why they need to be fed the knowledge all along.”

Communicating a Shared Responsibility

“Benefits packages that have been developing over the last decade, in my opinion, have gotten richer and richer. It’s important to stay competitive and have what employees are asking for, and when the economy is doing well, many companies are happy to do that. But many companies are in financially difficult times as well,” Parks says. “Some organizations are cutting employees to cut expenses, but that makes employees feel disposable. Our philosophy has been to cut other expenses so you don’t have to cut employees. Sure, you might not have a match or as rich a benefit package, but you’re also not going to cut employees’ income.”

“You want employees to look at their place of work as more than just a paycheck. You get more out of people if they feel like they belong and that what they do impacts the company positively,” Meadows explains. He suggests putting employees on the same level as the organization—tell them that rather than take a furlough or pay cut, they may have to kick in more money on benefits costs.

“Employers want to be transparent,” he adds. “Just let [employees] know, for example, ‘We’re decreasing the employer match but we’re doing it to keep us all whole. It’s something we have to do now, but when things get better, we have a plan to bring the benefit back.’”