Benefits January 5, 2017

The Evolution of Employee Wellness Programs

More employers are devising holistic wellness programs that address physical, mental and financial health; and technology could be the main driver in boosting participation.
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As health care costs continue to rise and financial insecurity becomes a leading stressor for thousands of Americans, employers are now taking a more holistic approach to developing wellness programs. According to a recent survey by provider Virgin Pulse, 76% of employers now offer wellness programs that address physical, mental, and financial health.

Although the financial piece is a relatively new component of total wellness programs, it may be long overdue. In an interview with PLANSPONSOR, Travis Freeman, CFP, President of Four Seasons Financial Education, revealed some yet-to-be-published survey findings on the impact of financial stress on health.

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The company found that 66% of employees who had high levels of financial stress reported feeling depressed, compared with only 17% for those with low levels. Among the group with high levels of financial stress, 72% reported anxiety, 46% reported sleeplessness, and 25% reported memory loss. The latest employee financial-wellness survey by PricewaterhouseCopper reflects these results finding that 52% of employees reported financial insecurity. Twenty-eight percent said it was affecting their health, and another 28% said it was a distraction at work.

Clearly, there is room for improvement in addressing employees’ financial wellness. In turn, this can have a positive impact on employee well-being, employer health care costs, and a company’s return on investment (ROI). But, how can employers create these holistic wellness programs while justifying their costs and measuring their impact?

NEXT: Using technology and employee satisfaction

A recent study by the RAND Corporation argues that the real savings come from disease-management programs, or the kinds that help at-risk employees avoid chronic illnesses and help chronically ill employees stabilize their conditions. While studying 10 years of data from a Fortune 100 employer, RAND found that disease management, as opposed to lifestyle management, accounted for 86% of hard savings in health care costs—generating $136 in savings per member, per month and a 30% reduction in hospital visits. The firm concluded that lifestyle programs like the ones focusing on weight management and nutrition ultimately failed to drive significant behavioral change.

Chris Boyce, CEO of Virgin Pulse, argues that employers may be able to overcome this obstacle by leveraging technology to personalize the wellness experience. His firm offers clients an interactive and customizable platform along with an app., which employees can use to pursue specific lifestyle goals such as being more active or getting more sleep. They can also track their progress digitally. Furthermore, the platform promotes emotional well-being through community action, something Boyce predicts will become even more important for employers in the years to come.

“The key is finding consumer-facing products that change behavior and that people actually like and use,” says Boyce.

Four Seasons Financial Education also puts a digital spin on financial wellness by offering online content, financial calculators, and short videos centered on personal finance. Furthermore, the firm provides clients with its proprietary Financial Health Assessment, an electronically administered assessment that asks about retirement confidence, emergency savings, and other finance-related questions. This is used to develop a personal, financial-wellness roadmap for employees.

But while employers can measure the impact of a health-related wellness programs through health screenings and analyzing employee health care expenses, putting a gauge on workers’ financial wellness may be a bit difficult. Freeman suggests analyzing turnover. “Have exit interviews and ask why people are leaving. If you find that fewer people are leaving for reasons involving pay, what that tells us is that your financial wellness program is probably showing people how to maximize the pay their company is giving them.”

Periodic third-party surveys of the employee population may also offer some insight into the more complex benefits of employee wellness programs, such as heightened well-being and increased satisfaction at work. The study by Virgin Pulse offered some sobering commentary on the matter.

The survey concluded that “employees overwhelmingly agree that their benefits offerings make them more appreciative and loyal to their companies.” Because of these programs, employees reported feeling positive about work culture (90%), energetic and productive at work (78%), and appreciated (67%). Furthermore, 65% of employees surveyed said they were both happier and healthier after participating in these programs.

Some of the most desired perks included health club memberships (44%), healthy food options on site (41%), and education around proper nutrition (37%). The most used included biometric screenings (66%) and physical-activity programs (51%).

But despite the wealth of choices available for developing a holistic wellness program, communication is still critical for its success. Here too, technology can play an important role.

NEXT: Awareness drives participation 

According to the Virgin Pulse survey, employees’ preferred methods of digesting information about wellness programs are via email (86%) and through the company intranet/website (51%). These are also the top two methods used by employers surveyed.

However, Boyce suggests there is still room for improvement. “HR communications has to be more personalized and targeted.” His own firm approaches this task by directing certain wellness-program information toward the employees who most likely would be interested in it based on what they feed into the platform.

“Let’s say I’m interested in reducing stress and we have an EAP program where you can get counseling online to reduce stress,” Boyce alludes. “The platform would recommend it to you if you’re interested based on what it knows about you in the system.”

Another important factor to consider is frequency. The survey found that most employees hear about their benefits on an annual or monthly basis (28%). Freeman argues the former may not be the best approach, especially when it comes to education-based components like financial wellness programs. “If you speak to employees about having better financial habits once a year, it’s just not enough,” Freeman explains.

“What we offer now is a combination of short videos. People are not going to sit through an hour-long presentation. But what we find is that a lot of companies still believe that’s what their employees want.”

Virgin Pulse recommends a variety of push and pull communication methods that utilize multimedia. As for the future of wellness programs, several providers predict it will continuously be more holistic and geared toward the emotional and social well-being of employees, while leveraging the innovations that lie ahead.  

“I think that corporations are going to lean into gamifying,” Boyce explains. “I think that the world of human capital management and all that’s already happening in the world of well-being will merge together. I think what clients want is a platform that will let them support their employees in growing and learning more in a variety of different ways.”

He also pointed to providers focusing on better ways to show these wellness programs can be effective in boosting employee productivity and overall well-being.

“One of my biggest fears is that there are a lot of wellness practitioners that are not good at showing those outcomes,” Boyce explains. “We believe that if you change behavior, you can change the output for individuals and for organizations. The industry as a whole needs to get more sophisticated in their ability to show those changes.” 

"The Business of Healthy Employees: A 2016 Survey of Workplace Health Priorities" can be found at Connect.Virginpulse.com. 

"PricewaterhouseCooper's 2016 Employee Financial Wellness Survey" can be found at PWC.com

The RAND Corporation brief "Do Workplace Wellness Programs Save Employers Money?" can be found at RAND.org. 

Compliance January 5, 2017

Claims in Excessive Fee Suit Against Prudential Tossed

A court found Prudential was not acting as a fiduciary and an employer’s 401(k) plan menu and use of an investment selection tool were appropriate.
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A federal judge has dismissed complaints against Prudential Retirement, an employer and its adviser in an excessive fee suit.

The participant who brought the proposed class action alleged that certain fees, including revenue-sharing payments, were kickbacks from mutual funds to Prudential. He also claimed that the 401(k) plan sponsored by Ferguson Enterprises included too many actively managed funds with higher fees than passively managed funds. Finally, he also accused a program offered by Prudential called GoalMaker, an optional program within the plan that assisted individual plan participants in making their investment selections, of directing participants to place their investments into higher-cost mutual funds that engaged in revenue-sharing with Prudential, resulting in additional compensation being paid to Prudential at the expense of the plan and plan participants.

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U.S. District Judge Victor A. Bolden of the U.S. District Court for the District of Connecticut first determined that Prudential was not a fiduciary with respect to the lawsuit’s allegations. Prudential did not have the contractual authority to delete or substitute mutual funds from its menu without first notifying Ferguson and ensuring its consent. In addition, Bolden found that the trust agreement strips Prudential of its discretionary authority over its own compensation, limiting Prudential‘s compensation to the fee schedule provided to the employer and requiring advance notice to the employer of any changes to the agreed-upon schedule.

Concerning Ferguson and CapFinancial (doing business as CAPTRUST), Bolden ruled that the plaintiff has not made any allegations directly addressing the methods used by Ferguson and CapFinancial to select investment options for the plan. And, the plaintiff makes no allegations that the funds in the plan underperformed, instead stating broadly that the concentration of mutual funds imposes unwanted expenses on plan participants without including any factual allegations regarding the availability of lower-cost alternatives.

NEXT: Attempt to move to zero revenue-sharing not compatible with ERISA

Bolden ruled that the Ferguson 401(k) plan ultimately offered a variety of investment options that included low-cost options, with expense ratios ranging from 0.04% to 1.02%. As of October 2014, the Ferguson Plan was offering sixteen total investment options, fourteen of which were mutual funds. Of these fourteen mutual funds, eleven were actively-managed and three were passively-managed. The Ferguson Plan did include several investment options that were made available to plan participants as alternatives to the higher-cost actively-managed mutual funds, including a Vanguard Institutional Index Fund, a Group Fixed Annuity option and a Prudential Stable Value option.

Regarding the GoalMaker product, Bolden found plan participants were provided with detailed information regarding the exact investments included within GoalMaker along with information pertaining to the fees involved with each of these investments. In addition, he noted it is undisputed that the GoalMaker program was optional for plan participants, and it did not offer any investment selections that were not already included in the broader menu of investment options.

Bolden added in his opinion that, in light of the legal insufficiencies discussed in connection with the plaintiff’s claims, further amendment of the amended complaint would be futile. At oral argument, plaintiffs described this case as part of a series of cases intended to move the entire industry… more and more to zero revenue sharing, based on the notion that zero revenue sharing is much less expensive for plans and for participants. Bolden said these goals, however worthwhile they may be, are not compatible with the purposes of the Employee Retirement Income Security Act (ERISA).

“While plaintiffs seek to transform the market itself by challenging the very framework of revenue sharing in this industry, ERISA protects plan participants‘ reasonable expectations in the context of the market that exists,” he wrote.

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