A New Employee Benefit Is Evolving: Financial Wellness

August 20, 2014 (PLANSPONSOR.com) - Employee financial education is moving from a product-driven model to a true planning model.

“When I first started [in this business], there was a model of financial education in which financial planners were focused on capturing assets and the investing strategies for those assets, so the business was focused on those with higher incomes and assets to invest,” noted Linda Robertson, certified financial planner with Financial Finesse, during a webcast hosted by the firm. “Most employees were financially stressed and so they were not targeted for financial planning. They had no help with basic financial and savings habits.”

Robertson pointed out that now regulators and plan sponsors want employees to have unbiased help from people or companies with no sales focus and no hidden agendas. In addition, there is a bigger focus on financial wellness—looking at the basics of budgeting and saving—which encompasses all employee benefits and focuses on positive savings habits to help employees reach all their financial goals.

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Liz Davidson, founder and CEO of Financial Finesse, added that employees need different financial lessons (and different benefits and insurance products) at different points in their lives. “We should get employees to a point where they have investable assets, then we can help them decide how to invest,” she said.

According to Robertson, financial wellness is becoming a new employee benefit. She cited an Aon Hewitt study that found 76% of employers indicated they plan to implement financial wellness programs or extend existing programs to more employees. Robertson also said more employer inquiries to Financial Finesse are about total financial wellness programs, rather than just retirement education.

According to Davidson, financial wellness programs are increasingly marketed as an additional employee benefit. Information about the programs are included in all benefits communications—on company Intranet sites and benefits handbooks. “Employers want employees to see it as an important overall component of pay, the culture of the company, and the employer’s concern for them,” she said. The approach to financial wellness and benefits is more personalized now; communications speak to employees about their own financial goals instead of a general “here are all employee benefits and the considerations for choosing them.”  

Employers are also highlighting how the financial wellness help is unbiased and how it will benefit employees. As a result, according to Davidson, there is a personal connection employees make with employers, and almost 100% appreciation by employees of this benefit.

Financial wellness programs continue to evolve. According to Robertson, in 2011, 54% of Financial Finesse clients used personalized financial coaching, while 46% used group sessions in their financial wellness programs. Last year 71% used personalized coaching and 29% used group sessions. “Technology has helped with this,” she noted.

Financial Finesse offers clients an online financial wellness center for employees. Robertson pointed out employees can use it on their own time. They select priorities for the self-assessment, and the program tells them key vulnerabilities. For example, someone may have serious debt or not have an emergency fund; the program would tell that person actionable next steps to improve their situation, such as to contact creditors to request lower interest rates or how to find room in their budget to set a small amount aside monthly for savings. Thanks to technology, employers can use online tools for their wellness programs, and use web chats and electronic communications to reach employees more easily and at times more convenient for employees, Robertson said.

Financial Finesse can customize its platform for employers, Robertson noted. For example, it can include a link to an employer’s retirement plan website when suggesting an employee start saving, or it could link to other employee benefits. Davidson added that it can list the contact information for employers’ employee assistance programs (EAPs), if credit counseling is recommended.

Davidson said employees get so much information—from employers, banks or credit unions, the Internet—that it is important to make it personalized. “Pull together all benefits and resources to create something relevant and cohesive for employees.”

The Financial Finesse financial wellness platform also aggregates employee assessment data, which can help employers design financial wellness programs, according to Robertson. The tool compiles data about different employee demographics and suggests initiatives based on the most–identified financial issues for employee groups. For example, for employees ages 30 to 44, the main financial focus may be money management or cash flow. The platform may suggest a financial basics workshop or workshop about handling debt for this group. For employees ages 55 and older, the main financial focus may be retirement, so the platform would suggest retirement readiness education.

Davidson gave an example of a time the platform revealed a problem with an employer’s retirement plan benefit. The client’s employees were highly paid, but showed concern about saving for retirement and asset allocation. Financial Finesse discovered the employer had a generous retirement plan, but it was too complicated in design, so the firm helped the employer rethink its plan design.

Robertson said financial wellness programs can help employees maximize the value of their benefits, increases their awareness of their benefits, and in turn, their appreciation of benefits. A key component of a financial wellness program is making sure employees are not selecting benefits in a disjointed way, but are instead selecting them based on overall financial wellness goals. Life-event considerations should be incorporated into the program, added Davidson. For example, if an employee is expecting a child, she can turn to the financial wellness program for a to-do list. It would include adding the baby to health care coverage and increasing health care or day care flexible spending account (FSA) savings, as well as non-benefit related items, such as reevaluating her budget or drawing up a will.

"A financial wellness program starts with employees’ needs and folds in benefits and other resources to help them meet those needs,” Davidson said. “Financial wellness is a process, not an event, that employees can use at various points in their lives or careers.”

Focus on DC Plan Benefits Renewed

August 20, 2014 (PLANSPONSOR.com) - Rebounding from the economic downturn of 2008/2009, retirement plan participants and plan sponsors are renewing their focus on their retirement benefits.

According to Deloitte’s 13th Annual Defined Contribution Benchmarking Survey, a more stable economy and job market helped remove a degree of employee anxiety about setting aside money for the future. The research underlying the survey found average defined contribution (DC) plan account balances have reached an all-time high of more than $95,000, up from $85,600 in 2012. Survey results also show an increased number of employees are participating in defined contribution plans, with participation jumping 6 percentage points (77% in 2013 vs. 71% in 2012).

In addition, the No. 1 reason for lack of employee participation in DC plans is no longer due to an “uncertain economy/job market” (14% in 2013 compared to 24% in 2012), but instead a “lack of awareness and understanding” (30% in 2013 compared to 21% in 2012).

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The survey found that companies are also showing renewed confidence in the economy and taking steps to make DC plans more accessible and attractive to employees. For example, immediate eligibility for matching contributions increased to 62% in 2013, up 6% from 2012. Unlike previous surveys, no plan sponsors indicated a suspended or discontinued company match. At the same time, “take advantage of the company match,” at 43%, was the top reason cited for employee participation, unseating “personal desire to save for retirement,” at 39%.

In addition, nine out of 10 plan sponsors made no changes to eligibility requirements, while 8% made them less restrictive in 2013 compared to 4% in 2012. Another 4% of organizations increased the maximum contribution percentages for participants in the past year.

When asked to indicate the most important objective of their DC plan, respondents chose “increasing participant savings rate” (32%) and “facilitating optimal retirement income replacement” (27%), in addition to improving communication and education efforts (19%). With increasing participation a key goal, plan sponsors continue to use automatic enrollment features for newly hired employees. The 2013–2014 survey shows 55% of plans have implemented an automatic enrollment feature. Overall satisfaction with the feature came in at 97%, due in large part to its positive impact—as rated by respondents—on plan participation rate (79%), participant awareness (57%) and average contribution rate (56%). With a goal of making it easier to increase savings, 46% of DC plans in the survey now include an automatic deferral increase feature.

When asked to rate the primary barrier to a more effective plan, the number one reason remained unchanged year-over-year—lack of employee understanding (30%). Looking at the top areas of confusion, the survey pointed to employees not knowing in what funds to invest (55%), followed by how much to save for retirement (35%).

When asked about the tactics used to encourage savings and raise awareness of assets needed in retirement, the highest rated approaches were general communications/education (73%) and group meetings (60%). Eighty-two percent of plan sponsors indicated that their recordkeeper/plan administrator offers valuable tools to educate employees. Taking it to the individual level, use of targeted communications (56%), individual meetings (32%), and personalized communications (23%) were all down from 2012 results.

Almost three-fourths of plan sponsors provide retirement income projections to employees to help illustrate where they may stand financially at retirement age and how increased savings can help them close any gaps. A majority of projections are delivered online, although there was an uptick in the number of plan sponsors sending income projections as separate communications, at 15% in 2013 compared to 9% the year before.

When it comes to individual financial counseling/investment advice, the good news is 62% of plans make this service available to all or some employees. The bad news is a relatively small percentage of employees take advantage of it (see “Retirement Plan Participants Not Utilizing Help”).

“While immediate eligibility for match and automatic enrollment continue to drive employee interest, there is still work to be done,” says Stacy Sandler, principal, Human Capital, Deloitte Consulting LLP. “Many employees perceive available education tools as too complex and intimidating. Retirement planning is unique for every individual, but many tools are created with a one-size-fits-all approach. Having the ability to recognize the gaps within the system is a solid first step in implementing effective remedies and reaching employees through their preferred channels.”

Deloitte’s 2013-2014 Annual Defined Contribution Benchmarking Survey was conducted electronically in conjunction with the International Foundation of Employee Benefits Plans and the International Society of Certified Employee Benefit Specialists. The survey’s 265 respondents are fairly evenly distributed by geography, size, industry and ownership status. The survey report may be downloaded from here.

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