How to Increase Employees’ Financial Wellness

Robust financial wellness programming can distinguish an employer, serve as a retention tool, provide a competitive edge, and lower labor costs by bolstering employees’ retirement readiness.

Plan sponsors gain several benefits that enrich both the employer and employees by offering financial wellness programs to workers, according to industry experts.

Financial wellness programs can sharpen an employer’s competitive edge, boost employee retention and recruiting, help reduce labor costs and increase worker productivity, panelists explained at a PLANSPONSOR Plan Progress webinar, “How to Increase Employees’ Financial Wellness.”

Russell DuBose, vice president of human resources at Phifer Inc., said the benefit to employers is clear, particularly following the labor market and employment upheavals that have resulted from the Great Resignation and ongoing COVID-19 pandemic. His company has experienced these shifts and the resulting impacts to recruiting and the cost of retraining workers, DuBose explained during the webinar.

“Financial wellness as a focus is a fraction of the cost of having to hire and train new people,” he said. “When you look at it from an HR and budgeting point of view, it is a very low-cost line item from a dollar perspective.”

DuBose added that for the energy and effort, the benefit “is so exponential, [and] it is so powerful.”

Previous research shows that demand among employees for financial wellness resources has increased. This presents a window for plan sponsors to work with participants to bolster their retirement readiness with additional tools and support.

Beyond the potential for greater employee loyalty, providing holistic financial wellness programming is likely to spill over to bolster employees’ overall financial confidence and can affect employees’ retirement readiness by helping workers to retire when they want, said Kelli Send, co-founder and senior vice president for participant services at Francis Investment Counsel, an institutional retirement plan investment consultant.

Retirement resources and holistic financial wellness tools help prepare workers to retire on time, she explained.

“A financially well-prepared individual that understands Medicare and Social Security tends to retire on time, which then actually can lower labor costs because the retired folks tend to be the ones that are higher paid,” Send said. “[It] continues to grease that wheel through the age process as employees go through their career life cycle.”

One retirement-specific area where plan sponsors can beef up financial wellness programming is decumulation resources for near-retirees and retirees, she noted.

“The 401(k) industry has responded to this lack of engagement and lack of information knowledge with all these wonderful auto-programs—auto-investing, auto-increases, etc.—and all that is absolutely amazing but at the core of it, people still just don’t know what to do with their money,” Send said.

Pam Hess, vice president of research and membership engagement at the Defined Contribution Institutional Investment Association, added that wellness programming can highlight the financial struggles employees experience, particularly for low- and moderate-income workers. This cohort has heightened financial stress and anxiety, she explained.  

“We know that emotional toll that financial stress brings is absolutely tied to [employees’] performance at work, and if those lines become much more blurred, benefit programs can have a really large and positive impact on employee financial well-being, which is a win-win,” Hess said.

The panelists said plan sponsors that are building a financial wellness program must pay close attention to what’s included in the wellness information, as well as costs, delivery methods and how to determine what’s best for their employees.

Send noted that plan sponsors might have money set aside in an Employee Retirement Income Security Act budget, which can be tapped to cover financial wellness programming. “It is an approved ERISA expense,” she explained.

DuBose said that when his company was looking for financial wellness providers, the top attributes for Phifer were that providers must be able to provide broad and deep resources to address the distinct needs of disparate workers.

“I have 17-year-olds to 80-year-olds and they demand different techniques and different ways to communicate,” DuBose said. “Some absolutely love an app; others don’t have apps because they have not yet made the decision to go to smartphones. We have a large variety [and] we try to meet everyone in the middle and provide different avenues to information.”

Hess added, “There need to be different methods to reach [employees]. They need to be very flexible in terms of timing when they’re offered, how often, and we have to keep reminding [employees] that they’re available because they might not be listening today, but in two weeks you might have their attention.”

The panelists agreed that the programming costs must be transparent—explaining whether the employee or employer pays, or if the two groups split the cost—and that resources should be customized in an appropriate way for each specific workforce.

One important aspect of instituting a financial wellness program is ensuring that service is available to employees “on the clock,” during working hours, Send said.

“If you expect people to do this at night or on the weekends, they’re not going to do so,” she said.

Additionally, when selecting a provider, plan sponsors need to ensure that the vendor has metrics to quantify engagement and employee progress, so they can justify the expenditure to the chief financial officer and have it in a budget, Send noted.  

Ultimately, the greatest attributes for a plan sponsor are that the wellness provider is committed to helping a firm’s employees, that it understands the company’s culture and that it can relate to the employees, DuBose said.

“First thing we do is tell those folks ‘Get those ties off your neck and relax and let’s have a conversation,’” Dubose explained. “This is the Deep South and we build relationships first. For us, the most important part of any provider or vendor is ‘Do they understand our culture and can they massage the way they do business to support our culture?’ Once they figure that out, they go forth and do great things—that’s how we approach our vendor selection.”

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