Data and Research September 24, 2020

BoA Finds Financial Wellness Disconnect Between Employees and Employers

Employer interest in helping employees grows, but workers aren’t reporting better financial security, and more are willing to use financial tools and resources from a third-party instead of their employer.

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Bank of America (BoA) has released its 10th annual “Workplace Benefits Report,” examining recent trends in financial wellness.

As the effects of the COVID-19 pandemic emphasize the importance of well-being, the survey found more employers are committed to ensuring their participants feel secure with their financial status. Sixty-two percent of plan sponsors say they feel “extremely” responsible for their employees’ financial wellness—a big jump from just 13% in 2013.

This response grows when employers also think of their employees’ long-term future, added Lorna Sabbia, head of retirement and benefit plan services at BoA, during a recent webinar. “Employers’ sense of responsibility is even greater when it comes to focusing on retirement-related progress,” she said. For example, when it came to retirement health care needs/costs, 80% of sponsors say they feel either very or extremely responsible.

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Yet, even as employer interest in helping their employees grows, workers aren’t reporting better financial security. Forty-nine percent of employees say they are feeling financially well today, down from 61% two years ago. However, 59% say they don’t have control over their debt, which could contribute to reduced feelings of financial wellness.

Being strapped for money after paying off monthly expenses is likely contributing to these feelings as well. According to the report, 38% of employees say they don’t have spare money after monthly bills. Eighteen percent said they are focused on other non-financial needs that are more pressing.

Women, who are more likely to halt their careers for caregiving and are still subjected to the gender pay gap, reported feeling lower levels of financial wellness than men. Forty-one percent said they would rate their financial wellness as good or excellent, while 58% of men say the same.

The survey also found slight disparities in the top three financial concerns for men and women. While both groups highlighted retirement savings and sufficient funds to pay for unexpected expenses as top goals, women were more likely to add paying off credit card debt as their third goal, while men were likely to be concerned about paying off a mortgage.

Among age groups, Baby Boomers led the way with 60% rating their financial wellness as good or excellent. Forty-one percent of Generation Zers and Millennials reported the same, with Generation Xers coming in last at 38%. Kevin Crain, head of workplace financial solutions at BoA, attributed these findings to that fact that Gen Xers are more likely to be in the midst of their careers while handling caregiving, aging parents and paying rent or a mortgage. “[They] are feeling a bit of a squeeze in terms of what’s going on in their lives,” he said.

Each cohort had distinct financial focuses, which BoA attributed to their members’ current lifestyle. Gen Xers said saving for retirement, paying off credit card debt and growing savings to pay for unexpected expenses were their top three areas of concern. Gen Zers and Millennials listed paying off credit card debt, buying a house and growing savings to pay for unexpected expenses as their principal goals, while Boomers and the Silent Generation reported saving for retirement, paying off a mortgage and paying off credit card debt as their main focuses.

Similarly, feelings of progress when it comes to retirement savings differed across generations. As Boomers and the Silent Generation enter and live in retirement, more of their members are likely to add to their retirement savings. Fifty percent say they feel progress in saving for retirement, compared with 23% of Gen Xers and 21% of Millennials and Gen Zers.

To increase financial well-being, more employees are seeking advice from retirement industry professionals. Given a list of financial resources, 41% said advice from a financial adviser, planner or accountant was most important to them. Thirty percent said they would like information on retirement plans; 28% are looking for financial products/services that help employees; 27% want online financial tools or calculators; and 27% are interested in developing financial skills and good financial habits.

More employees are also willing to use financial tools and resources from a third-party instead of their employer. Forty-seven of respondents said they would use retirement income planning tools from a third-party professional; 39% said they would use a health savings account (HSA); 37% would use health care cost estimators; 36% would use Social Security withdrawal education; 35% would use access to preferred checking and savings accounts; and 35% would use legal services.

If employers are implementing a workplace financial wellness program, BoA recommends incorporating a step-by-step plan and progress reports; a way to track finances, including debt; and streamlined information on one platform.

“[Employees] want tools and resources to help them stay on that track towards financial wellness, but one size does not fit all,” said Steve Ulian, managing director at BoA. “Some need a road map; others want progress reports. People are on different timelines on that journey.”

Compliance September 24, 2020

Sizable Settlement Reached in OSF Health ‘Church Plan’ Lawsuit

In the settlement agreement, OSF Health admits no wrongdoing, but the hospital system agrees to pay a sum of $25 million to better fund its pension plan.

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Details of a settlement agreement have emerged in the Employee Retirement Income Security Act (ERISA) lawsuit known as Smith v. OSF Healthcare System.

The plaintiffs in the case are a class of former employees and participants of one OSF’s pension plans. Their lawsuit argued that OSF was inappropriately relying on the “church plan exemption” included in ERISA, which provides that retirement plans run by “principal-purpose” religious organizations do not have to meet certain participant protection standards and funding requirements demanded of corporations and most other employers sponsoring tax-qualified pensions.

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Specifically, the plaintiffs alleged that OSF, in violation of ERISA, relied on the exemption to allow its plans to become severely underfunded. They alleged that the OSF pension plan’s holding assets are only sufficient to fund roughly 56% of accrued benefits.

In the settlement agreement, OSF admits no wrongdoing, but the hospital system agrees to pay a sum of $25 million to better fund the plan, to be paid in equal annual installments over the next five years. The agreement permits a maximum attorneys fee of $1.75 million for the class counsel.

The settlement agreement also provides certain non-monetary relief. For example, beginning 60 days after the effective date of settlement, the administrator for the OSF pension plans will put in place “certain new arrangements concerning the OSF plans’ administration, notices and procedures.” These include regular pension benefit statements to be sent to each participant in the plan, providing the “latest available information regarding his or her accrued benefits and information regarding which of his or her benefits are non-forfeitable benefits, if any, or stating the earliest date on which the benefits become non-forfeitable.”

Additionally, any participant in the OSF pension plan who has terminated service during a plan year and who is entitled to a deferred benefit under the plan will be provided with “a statement, upon request, regarding the nature, amount and form of such terminated plan participant’s non-forfeitable benefit.”

This conclusion to the church plan lawsuit comes only after multiple rulings in district and appellate courts. Most recently, the 7th U.S. Circuit Court of Appeals overturned a lower court’s decision to summarily dismiss the lawsuit while discovery was still ongoing. The ruling stated that the true underlying issue in the case is whether ERISA applies at all to the pension plans offered by OSF, a religious nonprofit organization that operates 11 hospitals in Illinois and Michigan.

The appeals court also noted that ERISA defines church plans in a specific way, as follows: “A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches.”

The full text of the settlement is available here.

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