COVID-19 and its effects have emphasized how ill-equipped many Americans are for a financial disruption. Panelists at the 2020 PLANSPONSOR National Conference discussed actionable steps employers and employees can take to plan ahead for the next financial setback.
Phifer Inc., a woven fabrics manufacturer in Tuscaloosa, Alabama, increased its budget for its benefits program once it realized more employees needed financial assistance. “We learned that we had more employees who were living paycheck to paycheck than we thought,” said Russell Dubose, human resources (HR) director at the company, during the virtual panel.
Increasing the budget allowed Phifer to offer its employees loans directly, so they didn’t have to touch their retirement savings, Dubose added. “We tried to put remedies in place to help our families without sacrificing retirement readiness,” he said. To determine an employee’s financial status, the company created a comprehensive worksheet.
Phifer incorporated coronavirus-related distributions (CRDs) under the Coronavirus Aid, Relief and Economic Security (CARES) Act for 90 days, but it didn’t publicize the loan option to employees. Some employees took a distribution, while others took multiple. Phifer scheduled one-on-one sessions with each employee who took a CRD, and it eventually found that most were using the distribution for consumer debt, not emergency-related debt. The program was immediately stopped in July, and, now, the company is working with those employees to navigate retirement readiness.
Rachel Weker, products and platforms vice president at T. Rowe Price, added during the panel that only 6% of T. Rowe Price’s participant clients took advantage of CRDs. Of that group, those who took a CRD and a loan were far more likely to take a large distribution. In further analysis, T. Rowe Price found that 83% of those participants had taken loans and over 40% had taken more than four loans before.
On the product side, Nathan Voris, senior managing director of business strategy at Schwab Retirement Plan Services Inc., said he’s seen more fintech—or financial technology—features being implemented to help employees, such as digital financial guides and traditional planning solutions. “I’m seeing more of a pivot back to financial wellness, establishing goals and then helping people make them,” he said. “In this environment, for the employee, it’s important to get that checked and just talk about their situation. Those are two ends of the spectrum that we’re seeing emerge.”
Moving forward, Weker said she expects to see an increasing demand for technology. Remote work and a focus on digitization will likely add to this drive.
Weker also touched on the importance of “prescribing” financial wellness. This approach provides employees with the proper information they need for their personal experiences. “We’re not talking about making certified financial planners [CFPs] out of these participants,” she said. “It’s taking this information and asking participants how they can achieve a specific approach and how long it takes.”
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