Data and Research September 23, 2021

Employers Are Prioritizing Financial Wellness

Studies show employers are offering access to financial products and tools, as well as financial advisers, and many plan to offer student loan debt repayment assistance. 

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More plan sponsors are offering financial wellness benefits to their employees, new studies show.

According to Bank of America’s 11th annual Workplace Benefits Report, 92% of 834 employers surveyed feel a sense of responsibility for the financial wellness of their employees, up from 81% in 2015. More than half say they feel extremely responsible. The report also found 46% of employers are offering financial wellness programs compared to 40% in 2020.

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Access to professional support has increased as well, with 47% of employers now offering access to financial advisers, 45% providing support for developing good financial habits, and 42% providing access to financial products or services. More employees are craving financial advice too, with workers listing access to a financial adviser, information on retirement plans and help with financial skills as the top three areas for which they want support.

High numbers of employees with student loan and credit card debt has compelled plan sponsors to add debt assistance tools to their financial wellness benefits, as 53% now offer help, compared to just 15% in 2013. Debt continues to remain a challenge for all workers, with 88% of Black/African American employees, 87% of Hispanic/Latino employees, 81% of white/Caucasian and 60% of Asian employees holding some type of debt.

Employers who do not offer debt assistance tools are planning to do so in the future, according to the 2021 Retirement Planscape report from the Cogent Syndicated division at Escalent. Among those not offering a student loan 401(k) match, seven in 10 large-mega plans (71%), 46% of small-mid plans, and 36% of micro plans are likely to do in the future.

Under the new Coronavirus Aid, Relief and Economic Security (CARES) Act extended through 2026, employers can make tax-free contributions of up to $5,250 per year to help pay off an employee’s student loans. Due to the new provision, four in 10 defined contribution (DC) plans are likely to offer student loan payments as an employee benefit. Only 9% of large-mega plans are averse to adding this benefit in the future.

The Cogent study found a greater number of DC plan sponsors are relying on plan provider financial wellness programs (50% vs. 40% in 2020). Financial wellness programs remain centered around retirement income planning, online access to financial tools, access to financial advisers and health savings account (HSA) guidance, each component offered by at least three in 10 plan sponsors across all plan-size segments. Cogent says this aligns with plan participant interest found in its DC Participant Planscape study.

Products September 22, 2021

Vanguard to Offer Auto-Portability Solution to 401(k) Plan Clients

The firm is partnering with Retirement Clearinghouse to help plan sponsors simplify small-balance 401(k) rollovers.

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Vanguard says it plans to introduce an auto portability service for 401(k) sponsor clients and their participants.

The firm has engaged Retirement Clearinghouse, LLC (RCH)—a provider of consolidation services for defined contribution (DC) plans and an RLJ Companies’ majority owned company—to provide plan sponsors with a new portability solution to simplify small-balance 401(k) rollovers, help more employees preserve their retirement savings and improve their chances of investment success. The service is expected to launch in mid-2022.

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Research shows 401(k) participants with smaller balances often do not roll over retirement savings into their new plans or tax-advantaged vehicles after changing jobs, Vanguard says in the announcement. When a participant leaves a job with less than $5,000 in their 401(k), employers can transfer those accounts out of the plan and into a safe harbor individual retirement account (IRA), where fees can be higher. This can result in a proliferation of stranded safe harbor IRAs, participant cash-outs and forfeiture of future savings and returns, Vanguard adds.

To reduce the number of participant cash-outs or abandoned savings, the RCH Auto Portability program automates the movement of an employee’s 401(k) savings account from their former employer’s plan into an active account with their current employer’s plan. The service can also help simplify plan administration and improve plan compliance by reducing the instances of abandoned accounts and uncashed checks.

“Our partnership with Vanguard represents a giant leap forward in the campaign to make auto portability for small accounts the new 401(k) plan default process when participants change jobs,” says Spencer Williams, founder, president, and CEO of Retirement Clearinghouse, LLC. “By working with us to expand the nationwide, electronic network connecting employer-sponsored plans, Vanguard is helping simplify the 401(k) rollover process and giving more Americans the opportunity to strengthen their outcomes in retirement.”

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