Wellness Programs Incomplete without Financial Component

During a webcast, Travis Freeman, board certified financial planner and current president of FSFE in St. Louis, Missouri, noted that employer wellness programs include physical wellness initiatives and perhaps even a mental wellness component. However, Freeman cited an Associated Press/AOL Health Poll, “Debt Stress: The Toll Owing Money Takes on the Body,” that found people with high levels of financial stress suffered more from migraines, severe depression, severe anxiety, muscle tension and back pain, high blood pressure and stomach ulcers than those with low levels of financial stress.

“You need all three components—physical, mental and financial—for a complete wellness program,” he asserted.

Financial wellness programs are NOT:

• Occasional “lunch and learns” – Freeman said these are financial wellness events, but not programs;
• Annual 401(k) or 403(b) meetings – These are necessary and may be a component of a financial wellness program; or
• Employee assistance program (EAP) referrals – Referring people who are having financial difficulty to a counselor is not a financial wellness program, according to Freeman.

FSFE defines a financial wellness program as “an ongoing program which educates and motivates employees to make positive changes to their personal finances and stay accountable to goals.” Financial wellness programs may address retirement readiness; college readiness; elder care/sandwich generation issues; budgeting; cash flow and debt; and sticking to a financial plan.

Freeman pointed out that employees are often dependent on employers for financial education because it is through employers that they get most of their financial assets or tools—income, insurance, retirement savings plans, health savings accounts, etc.

According to Freeman, there are three barriers to financial wellness financial programs need to address:

• Costs – To get financial help at low cost, individuals can take a class, use a self-learning program or read publications, but Freeman noted people would rather see a financial professional than go to a website. However, he noted there is a shrinking group of financial professionals— one to every 993 Americans, according to 2010 data from Reuters—and costs have gone up for seeing a professional—it could range from $100 to $400 per hour. A workplace financial program solves the cost issue since employers can get access to tools and professionals more cheaply due to their economy of scale.
• Accountability – Just as most people do not stick to New Year’s resolutions, many do not follow through with financial plans, Freeman noted. But, he said, with financial wellness, accountability equals effectiveness. An employer-provided program includes goal-setting and check-ups to keep people accountable.
• Priorities – “Even some doctors and lawyers do not have their finances in order due to procrastination; people say they’ve been busy,” Freeman said. But, he argued that really, they just do not make it a priority. He noted that people plan social events or vacations far in advance, but not retirement. “We can’t fathom planning that far in advance because there’s nothing else for which we plan that far ahead. He cited Employee Benefit Research Institute (EBRI) data that shows 56% of workers have not calculated even basic retirement needs. An employer-provided wellness program gives employees a sense of importance of financial goal-setting and increased knowledge to set goals and take action.

Some trends in financial wellness programs FSFE is seeing, according to Freeman, are the use of financial wellness incentives similar to physical wellness incentives. Employers also coordinate all benefits vendors together to work as a team. Sometimes, a financial wellness program vendor will take on the task of coordinating benefits vendors.

Freeman said one FSFE client was able to get the costs of its entire wellness program covered by its health insurance carrier. Others look to benefits firms and consultants to provide wellness programs and share costs. He noted that retirement plan sponsors can possibly use plan assets to pay for financial wellness programs; they should ask their service providers.

Freeman said the tough part about the financial wellness industry is understanding vendors. “It is easy to identify plan providers, but hard to identify financial wellness vendors,” he noted.

He shared four categories of financial wellness program vendors:

• Web-based – They have a moderate cost and are available anywhere and anytime, but employers may see lower employee engagement because there is less sense of accountability and priority. So, employers will see less return on investment (ROI).
• Publication based – They provide extensive information, anytime and anywhere, but employers may be paying for some information that is free online, and there is no or low accountability for employees.
• Hotline vendors – This is the least expensive option and it is convenient, but they also have the lowest employee engagement, according to Freeman. “Employees usually call a hotline after they have a financial wellness issue, and a financial wellness program should prevent issues from occurring.”
• Professional-focused vendors – They provide direct guidance and a formal plan of action for employees, but they are sometimes expensive. In addition, Freeman said, not all professionals are created equal. “There’s a difference between an adviser and a board certified financial planner. Some are out there just to sell products.”

Financial wellness vendors commonly charge a fee per employee per month, but sometimes they charge a flat annual fee, according to Freeman. If a vendor offers to offer a program for free, he warned, employers get what they pay for and are likely to end up with someone trying to sell employees something.

Employers should plan on providing a three-year or longer program; it cannot just be six or twelve months, Freeman suggested. He added that company leadership must be engaged for the program to be successful. Employers should coordinate vendors to make sure they are working together, and quarterly education is ideal to keep things top of mind and keep employees accountable, according to Freeman. Finally, employers should track program metrics to determine ROI.

FSFE listed potential benefits for employers of offering a financial wellness program to employees, according to Dr. E. Thomas Garman of Virginia Tech University (retired):

• Increased productivity,
• Decreased absenteeism,
• Reduced administrative expenses,
• Reduced Social Security payroll tax,
• Fewer stress-related illnesses,
• Reduced health care premiums,
• Fewer accidents,
• Greater satisfaction with employer benefits,
• Reduced turnover,
• Reduced HR expenses,
• Less pressure to reduce pay,
• Increased morale and loyalty,
• Acceleration of worker retirements, and
• Reduced fiduciary liability and potential litigation.

Freeman noted that a great financial wellness vendor will be able to provide employers with metrics on program usage and impact, but some things it can’t track, such as employee turnover or productivity.

Some things employers should look at to evaluate ROI include:

• Are more Baby Boomer employees able to retire?
• Is there greater flexible spending account (FSA)/health savings account (HSA) utilization because employees can funnel more into these accounts due to improved budgeting as a result of the wellness program?
• Are fewer employees leaving because of pay?
• Are fewer employees taking loans from their retirement plans?
• Has employee productivity improved?

Freeman suggested employers review the 12-month impact of their financial wellness programs, and review annually thereafter.