Benefits December 29, 2020

Financial Wellness Programs Need to Include a Way to Measure Success

There are specific metrics that can be measured via data and employee and employer surveys.

Reported by

It is important for employers offering a financial wellness program to measure the success of their programs. This will help determine whether employers are getting a good return on their investment, as well as whether there is a need for change to financial wellness program components.

In a Viewpoint article, “A Return on Wellness—Measuring Financial Wellness Programs,” the Retirement Advisor Council notes that employee surveys and internal information gathered prior to the launch of a financial wellness program establish a baseline from which to measure the program’s success.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Some goals such as improving retirement readiness are relatively easy to measure, Cerulli Associates says in a 2019 report. However, others, such as improving financial literacy, increasing workplace productivity and decreasing employee stress (14%) can be more nebulous.

While improvement in employee situations and actions is one part of measuring the success of financial wellness programs, employers can also measure how the financial wellness program improves the cost employee financial stress imposes on them. The sixth annual edition of John Hancock Retirement’s Financial Stress Survey shows more than half of employees worry at least once a week about personal finances while on the job, causing workplace distraction and a loss of productivity. This loss of productivity, combined with absenteeism from financial stress, has a major impact on organizations, John Hancock says.

In dollar terms, absenteeism and lower productivity tied to financial stress is costing more than an estimated $1,900 per year, per employee, and totaling an estimated annual loss of $1 million for midsized employers and $19 million for large employers, according to John Hancock’s findings.

Issues Financial Wellness Programs Should Address

The Retirement Advisor Council’s Viewpoint article suggests root causes of employee financial stress that wellness programs should address.

These include, but are not limited to:

  • Increased housing prices and extreme housing shocks;
  • Increased student loan and consumer debt that employees are carrying throughout their working lives and into retirement;
  • Market volatility and its relation to retirement savings;
  • Rising health care spending, which has outpaced any increase in employee wages over the last decade;
  • Periods of high and prolonged unemployment;
  • Increased longevity of loved ones and escalating caregiving needs;
  • The changing nature of work and increasing integration of technology, requiring new skill sets to advance in current jobs and be marketable for other jobs; and
  • Increased lifespan in retirement that needs to be funded, as well as a greater possibility of needing long-term care.

“An objective financial wellness assessment can play a pivotal role in providing actionable feedback to employers regarding the appropriate intervention and [financial wellness program] design,” the article says. “The financial wellness program can then be tailored to address the specific goals and needs of the particular workforce.”

No Success Without Employee Engagement

In a previous Viewpoint, “What Do You Mean When You Say Financial Wellness?”, the Retirement Advisor Council points out that financial wellness programs must be engaging to be successful.

It says the program should be accessible and usable to anyone regardless of literacy, wealth or earnings; delivered to employees as early as possible and using a combination of media (online, print, in-person, video conferencing, podcasts, audio content and toll-free contact centers); supported live at least 12 hours a day and six days a week; available from a trusted source; and mindful of privacy requirements, cybersecurity and data protection needs.

One strategy to drive engagement from participants is to design these programs to be entertaining, the paper suggests.

Eric Henon, executive director of the Retirement Advisor Council, says that a survey of advisers found that on average, 19% of clients use a rewards program to encourage financial wellness program engagement. Most advisers are in the 1%-to-25%-of-clients range. “On the high end, 3% of advisers say all their clients have a rewards program for financial wellness; 8% say 75% of their clients or more have a rewards program in place; and 14% say 50% or more of their clients have a rewards program for financial wellness,” he says.

Measuring engagement of employees is one way to measure the success of financial wellness programs.

Henon says the financial wellness service provider itself will monitor the use of services. Levels of engagement are measured by the number of employees who access the program, the number who attend education sessions and the number who meet with advisers/coaches. “The responsibility for measuring engagement depends on the model used for the program and whether it is recordkeeper provided, adviser provided or provided by another third-party firm,” he says.

Henon adds that the champion for financial wellness within the employer’s organization should also track other information, such as the number of employees who provided information for the baseline and the number of employees that have created a step-by-step plan of action. “There needs to be someone accountable for measuring various engagement metrics,” he says. “Whether a person gathers the information or it is provided through automation, the person accountable should be identified before the program is rolled out.”

Measuring Program Success

The Viewpoint report suggests qualitative and quantitative metrics to measure the return on investment of financial wellness programs. It says employee and manager surveys can be used to measure changes in employee morale and job satisfaction, absenteeism, satisfaction with the financial wellness program, financial stress, debt level and confidence in retirement readiness.

Henon notes that a hypothetical calculation of employer costs due to financial stress doesn’t include the cost of employee turnover or increased use of health care because of the stress. He says the best way to identify turnover costs is through manager surveys.

The report also identifies data points that can be used in measuring the success of financial wellness programs. Data can show changes in health insurance claims and costs, in addition to the number of employee absences and tardiness, the level of employee participation in the employer’s retirement plan, the use of retirement plan loans and in-service distributions and the participation in and use of other employee benefits.

Henon says the measurement of the return on financial wellness should be done at least annually, but he thinks every six months is even better. “If you look at the progress Prudential made in the case study in our Viewpoint, there was a fair amount of progress from year to year, and decisions to modify the program can be made annually,” he says. “But, a mid-year measure will help to discern changes needed for the following year.”

Benefits December 29, 2020

The Changing Attitude Toward HSAs

Considering the need for effective health care in 2020 due to COVID-19, health savings accounts took on new value.

Reported by

Health savings accounts (HSAs) have long been regarded as effective savings vehicles to pay for health care expenses in retirement, but the medical crisis of the COVID-19 pandemic has many employers rethinking HSAs for the future.

Refusing to Cut HSA Contributions

The coronavirus pandemic severely affected businesses and their employees alike, forcing some companies to lay off and furlough staff, eliminate bonuses and cut benefits. Experts warned employers of the potentially disastrous effect of cutting HSAs, such as compelling struggling participants to pay medical expenses out of pocket during a pandemic.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“We asked brokers and employers what concerns most of their employees and clients have, and 54% answered they are concerned for the health of themselves and their family, which shows the immediacy of the situation,” said Alison Moore, vice president of marketing at HealthSavings, an HSA provider, in May.

Still, experts noted there was little data to suggest employers were stopping HSA contributions. Instead, Moore said, at least one of her clients was decreasing its 401(k) matches to avoid touching HSA contributions. Instead, the client was considering elevating contributions to HSAs. “They believe the HSA benefit offers more immediate relief for the current challenges,” Moore said.

Employing Loans to Fund HSA Contributions

The passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act raised questions about Small Business Administration (SBA) loans and the Paycheck Protection Program (PPP)—more specifically their relationship to HSA programs.

While Moore noted that SBA and PPP loans can help employers make contributions to employees’ HSAs, the emergence of new, lengthy CARES Act guidance was taxing for employers. Many found little clarification on the regulation and instead were warned of potential compliance issues should they make a mistake or an oversight. 

In an interview with PLANSPONSOR, Kevin Robertson, chief revenue officer at HSA Bank, an HSA administration provider, said employers may begin or increase HSA contributions for their employee population under SBA loans, but may not selectively contribute to just one or only some employees’ accounts. If it does, the employer can be subject to HSA comparability or nondiscrimination rules.

Under the CARES Act, rules on the PPP state that employers may use the money from these loans for payroll costs, and because the loans are intended for employees, plan sponsors may use them toward HSA features, said Moore.

Robertson still urged employers to tread carefully if applying such loans to HSAs, mainly because of limited understanding of the regulation.

Better Understanding of HSAs

To further familiarize employers with HSAs, industry experts reviewed rules and regulations on the accounts, in the 2020 PLANSPONSOR HSA Conference, presented online, in October.

Speakers discussed maximum contribution amounts for HSAs, limited to $3,550 for self-only coverage and $7,100 for a family this year. Those 55 and older could make a $1,000 catch-up contribution. As of 2020, the high-deductible health plan (HDHP) minimum deductible to trigger HSA eligibility is $1,400 for self-only coverage and $2,800 for family coverage, coupled with a maximum out-of-pocket limit of $6,900 for self-only coverage and $13,800 for family coverage.

The panel explained that individuals may make both pre-tax contributions through payroll deductions as well as after-tax contributions. They may also deduct from their income when filing tax returns. Another notable feature is that account holders may deduct from their own income the amount of HSA contributions made to their account by other people—but not the employer. Another favorable feature is that employer contributions are excluded from the employee’s income taxes.

The panel further noted that HSA funds may be used for other expenses, though penalties and taxes will apply in certain circumstances.

Retirement Plans and HSAs

Conference speakers also discussed the relationship between retirement plans and HSAs, noting how critical the savings accounts can be to an employee’s retirement.

In the short term, HSAs hold offer the benefit of complementing a medical plan, said Jeffrey Dorfman, managing principal of retirement practice at Qualified Plan Advisors. But, over time, the vehicles can help participants save money on qualified medical expenses in retirement.“We anticipate a merging of the conversation in which you no longer distinguish how you can help your employees in your 401(k) versus how you can help employees in [an] HSA,” he explained. “Most employees don’t look at their benefits package as six or seven features; they look at it as one.”

Steve Lindsay, senior vice president of relationship management at HealthEquity observed that 401(k) and HSA benefits complement each other, that instead of concentrating on one benefit offering, plan sponsors should provide a more holistic view of both.

A combination of these tactics can push HSA and 401(k) participation forward, Lindsay said. “We can drive a lot of behavior by helping them do the math and understand that this plan design creates wins for people,” he concluded.

«