EBRI seminar examines the broadening focus
Whether it is via webinars, digital resources or personal coaching,
financial wellness is evolving beyond a focus exclusively on retirement plans.
By Thomas A. McCoy, CLU
Retired business owners or CEOs, if they have been disengaged long enough from their former workplace, might be puzzled by the benefits term “financial wellness.” “Isn’t that what employees get when we pay them?” they might ask.
Well, yes. The paycheck and the retirement plan are still the most critical tools for creating financial wellness for workers. HSAs can be an important contributor as well. But, among other things, financial wellness may also include benefits that help employees manage their money, both in and out of the retirement plan.
Within the defined contribution (DC) plan, employers have guided employees by establishing auto-enrollment, and making target date funds the plans’ default investment option. Outside the retirement plan, some employers are offering their employees money management assistance such as emergency savings plans, college debt assistance and financial counseling.
It’s not hard to see why employers are interested in expanding the financial resources they provide to employees. EBRI’s (Employee Benefits Research Institute) 2024 Workplace Wellness Survey found that 73% of employees agreed that thinking about their financial future makes them feel stressed.
Sharon Carson, executive director, retirement insights strategy, J.P. Morgan Asset Management, told a recent EBRI seminar, “If an employee is worried about their finances, what impact is that going to have on their job performance?”
The two leading financial stressors for employees, according to EBRI’s survey, are “saving enough for retirement” (48% of respondents) and “having savings in case of emergency” (45%). Financial experts at a recent EBRI forum examined the link between these two sources of employee stress, and how an emergency savings account could serve as a short-term tool for boosting long-term retirement plan success.
Suze Orman, the widely-recognized financial advisor, author and co-founder of SecureSave, noted that workers who lack ready access to an emergency savings fund will utilize credit cards, or retirement account loans to cover short-term emergencies. “Having the emergency fund, besides keeping the retirement fund intact, gives the worker a sense of pride,” Orman said. “Once they have it, they continue to maintain it.”
David John, senior strategic policy advisor, AARP, said employees’ interest in emergency savings plans is stimulated by three factors: whether there is some kind of a company match, the ability to adjust the withdrawal amount, and their concern for privacy. “The employee doesn’t want the employer to know how much they’ve saved, when it is being used, and what it’s being used for.”
John added, “We get questions regularly from employers about whether offering an emergency savings plan could take away contributions from employees’ defined contribution retirement plans. The answer, based on available research, is ‘probably not.’”
Carson agreed. “Employees without an emergency savings plan already are putting less into their 401(k)s because they are covering emergencies through other sources,” she said.
Kirsten Hunter Peterson, vice president of thought leadership, Fidelity, noted, “It’s stressful going to senior leaders in an organization to advocate for any new benefits expenditure, including emergency savings programs. We can make it easier by identifying the research and the better outcomes that these programs can produce. We’re at the beginning stages of emergency savings plans. But the early outcomes are really promising.”
Even if financial wellness initiatives are still being developed, acceptance of the need is on the rise. In EBRI’s study, 43% of employers reported having a high concern for employee wellness, an increase from 39% the prior year. Prior to the pandemic, in 2019, only 22% of employers were highly concerned with employee financial wellness.
Employers’ concern for financial wellness has broadened beyond retirement planning, according to EBRI’s survey. Three out of 10 employers said they are also interested in helping employees deal with money management issues and financial stress. Among those that already have financial wellness programs, seven out of the 10 companies believe their budget for those programs will increase over the next two years.
Financial counseling offered through an employer could become the foundation for future financial wellness programs. The counseling could include advice on managing funds an employee is using during their working years as well as funds being set aside for retirement. Strategies are likely to vary widely, including by size of the employer.
John said, “The biggest future challenge we have for an older workforce is how to take that lump sum of money from a DC plan and convert it into a relatively stable income stream. As a financial wellness benefit, this is something we should not ignore.”
Peterson agreed. “One of the most popular financial wellness benefits we are hearing about now from employers and employees is retirement income options—how do they develop and distribute a stream of income from the defined contribution plan.” The urgency is heighted, she said, “because 30% to 50% of workers will have to retire early.”
She added that healthcare is proving to be the biggest retirement expense, so it is getting a lot of attention from employers, including the use of HSAs.
Megan Conroy, director of financial education, strategy & delivery, at Bank of America, said, “The lack of understanding of HSAs is astounding. Our research shows there has been a 7% decrease in the number of people who can correctly identify what an HSA does. They don’t understand that they can use it for further payments, not just as a ‘pay as you go’ plan.
Barbara Kontje, who heads up the financial well-being program at American Express, noted that personal finance is a matter of personal choices. “Some employees are looking to talk to someone for advice, while others want to do everything digitally.”
American Express provides access to financial coaches as an employee benefit. Approximately 5% of the company’s 26,000 employees have received financial coaching, although that number rises when others are included as part of a separate intake program, Kontje said. (For example, in order to have funds put into an employee’s HSA, they might have to do certain activities which could include talking to a financial coach or taking a financial wellness assessment.)
Kontje told the EBRI seminar audience that to successfully promote financial education, it needs to be made specific to the audience. “We do webinars on financial planning, and if we used to get 25 people to attend, I would be thrilled. Then we tried promoting a webinar titled ‘Women and retirement planning.’ We had so many participants, we broke the webinar.
“They wanted to hear the stories of what other women were going through, such as how to pursue financial goals when they have to leave the workforce temporarily.
Whether it is via webinars, digital resources or personal coaching, financial wellness is evolving beyond a focus exclusively on retirement plans. “Sure, employees need retirement planning help,” Conroy said. “But people want employers to talk to them in the context of their broad financial life. Financial wellness isn’t a milestone. It’s a journey. It depends on where you are in your life.”
The author
Thomas A. McCoy, CLU, is an Indiana-based freelance insurance writer.
