Determining the Success of Financial Wellness Programs

Monitoring improvements in employees’ financial lives effectively gauges the success of employer financial wellness programs.

Employers have been increasingly interested in offering financial well-being programs to employees over the years, and the COVID-19 pandemic has accelerated this interest. Nearly half (49%) of plan sponsors added financial well-being tools or services to their benefit offerings last year and 17% plan to add them in 2021, according to Alight’s “Hot Topics in Retirement and Financial Wellbeing 2021” report.

“Employers are saying, ‘We understand finances can contribute to stress,’” says Rob Austin, head of research at Alight Solutions. “A lot of them want to help [employees] get a handle on their finances. Sometimes it’s helping someone with budgeting, emergency savings, etc. It starts with employers saying ‘We’re here for you.’”

This greater emphasis on financial well-being stems from a desire to reduce employees’ fiscal stress, especially during a year marked by market turmoil, job losses and benefit cuts. A new Broadridge study found that more than one-third of workers reported experiencing financial benefit reductions since the beginning of the pandemic. As a result, more American workers are longing for access to holistic financial wellness programs.

The Broadridge findings show that as unemployment skyrockets, more employees are interested in companies that provide holistic financial wellness offerings. Even workers who have not experienced job loss in the past year are seeking positions that offer the benefits they want, including emergency savings tools and advice on personal finances.

Are Employers Offering the Right Benefits?

To know whether their financial wellness programs are working and whether they are offering the right benefits, employers need to determine a way to gauge the success of their programs. According to the Alight report, most employers are looking at how workers are using the benefits they’re offered (85%) to try to determine success. Employers are also looking at retirement plan statistics, such as decreased leakage or higher participation rates (55%) and employee engagement (52%) as measures of success. A few are measuring medical costs and absenteeism.

How Employers Intend to Measure Financial Wellbeing Program Success in 2021

Employee use of benefits
Retirement plan stats
Employee engagement
Medical costs
Do not intend to measure
Source: Alight 2021 Hot Topics in Retirement and Financial Wellbeing Report

Austin says he has noticed some employers provide tools and assessments to measure where employees stand with their financial well-being. Employees take such assessments multiple times a year to track improvements. Adding such a tool gauges the financial wellness program’s success rate while looking at its impact on participants’ well-being. “It’s an evolving spot where we’re seeing employers asking ‘How can we measure these programs?’” Austin explains.

Along with surveying employees, Mark Smrecek, senior director, financial well-being market leader at Willis Towers Watson, notes more employers are applying data to assess effectiveness and signal financial insecurity with participants. “They’re looking at defined contribution [DC] withdrawals, loans, reducing or limiting retirement savings contributions, etc.,” he says. “They’re also listening to employees’ responses, either through virtual focus groups or surveys, to learn more about how their financial lives have changed.”

In order to measure their programs, employers will have to read data at an employee level, Smrecek adds. Many are setting up measurement strategies to understand how participant behavior correlates with program success. “We’re starting to see employers take a look at these items over time, to see if they’re having the intended business impacts more broadly within their organization,” he says.

Other experts suggest employers should focus on the basics. Snezana Zlatar, senior managing director of financial wellness advice and innovation at TIAA, says she believes no single metric or benefit offering will cover an individual’s financial security. Instead, employers should continually monitor core pillars of financial wellness that benefit participants holistically. These drive selections of solutions and programs, including education, tools and advice, that are best suited for specific employee segments, Zlatar says.

“A good example would be that if an assessment shows a segment of employees struggling with student loan debt, implementing a solution that helps them with this need would be the next logical step,” she adds.

TIAA says plan sponsors should assess three specific areas when it comes to wellness, starting with employees’ ability to effectively manage daily finances, including budgeting and consumer and student debt.

The second is the ability to plan, save and invest for long-term goals. “While driving optimal retirement outcomes is critical, it is key to help participants plan and prioritize other goals they have for themselves and their family,” Zlatar says.

The third focus area measures protection against key risks, such as market volatility, longevity, inflation, etc.

When plan sponsors measure the effectiveness of their programs, they’re more likely to add financial advice offerings for employees, especially as younger workers opt for personalized solutions. The Broadridge study found that 76% of Generation Zers and 62% of Millennials believe having a financial adviser is worth the cost.

“It’s clear that financial wellness programs are more important than ever coming out of the pandemic,” notes Cindy Dash, general manager of Matrix Solutions, a Broadridge company. “It’s also not just about the programs being offered, but the benefits that employees are receiving.”