Why Offer a Financial Wellness Program?
Employers, including those within the automotive industry, have moved from providing traditional pension plans to offering 401(k) plans. Although theoretical calculations show that employees who stay the course with their 401(k) plan contributions can accumulate sufficient account balances, most employees do not stay the course. In addition, employees are increasingly paying more out of their own pockets for health care expenses and, with the shift to 401(k) plans, they have assumed the risk and responsibility for their own retirement.
As a result, many Americans are becoming increasingly anxious about their retirement and overall financial security. Companies have started to recognize that all this worry about money takes a toll on employee productivity and health in the workplace. To address this, companies are adding financial wellness to their existing employee wellness offerings. Financial wellness is an important aspect of an employee’s overall wellbeing.
The goal of a financial wellness program is to enhance the employee’s overall financial health. To accomplish this, the program should include two-steps: (1) creating a workable financial plan (for both the short and long-term); and (2) enabling employees to make decisions to manage that plan over time.
Elements of a Financial Wellness Program
Historically, employers have focused on 401(k) plan education and saving for retirement. Financial wellness programs are more holistic, focusing on:
- Getting out of debt
- Setting aside money for emergencies
- Saving for a home
- Saving for children’s college tuition
- PLUS retirement planning
An effective financial wellness program is not one-size-fits-all. Programs can include group educational sessions, individualized online learning and individual meetings with a financial professional (in-person or by telephone).
It is also important to combine financial wellness with 401(k) plan education and design. Employees who do not know how to create a budget cannot understand how to manage and invest their 401(k) plan accounts. The best financial wellness programs include enhancements to the employer’s 401(k) plan, adding features that encourage participation and increased savings, such as auto-enrollment and auto‑escalation.
- Get Management Buy-In Up Front: If senior management is actively involved in the program, more employees will participate. Show employees that the company cares about their financial wellbeing.
- Take Surveys to Measure Outcomes: Conduct a before and after survey (use the same questions for both to better gage results). For privacy reasons, the collected data must be anonymous.
- Offer Both Web-Based and In-Person Training: Web-based programs often are more flexible and easier to access, but these programs may not be enough on their own to encourage participation. Combining a web-based program with in‑person and/or telephone meetings led by a financial expert who can address each employee’s unique situation and goals tends to be more successful.
- Return on Investment (ROI) is Not Best Measure of Success: It is virtually impossible to prove the ROI of financial wellness programs. Instead, focus on the purpose of the investment — reducing stress and boosting employee morale — which can improve the bottom line for both employees and the company.
Where to Find Financial Wellness Services
A good place to start may be with the company’s 401(k) recordkeeper. There are also companies that specialize in providing financial wellness programs for employers. Because the financial wellness provider will have access to employees’ personal financial information, it is important to follow a thorough vetting process when choosing a provider. It is best practice to complete a request-for-proposal (an RFP). It is important to involve the company’s benefits attorney in the RFP and contracting process. If your company is interested in implementing a financial wellness program, Warner’s employee benefits attorneys are here to help.