Saturday, June 17, 2017

What Plan Sponsors Want to Know About Financial Wellness

Several years back the concept of “wellness” crept into benefits planning. More recently, HR’s affinity for that wellness concept has been expanded upon by the concept of financial wellness. But as appealing as the notion is, a number of key questions linger.

With regard to wellness generally, the notion was simple: Rather than just treating the symptoms of poor health with insurance-funded trips to the doctor (or the hospital) after the damage was done, we’d get ahead of things by emphasizing healthy habit steps (smoking cessation, weight loss, etc.) programs that would reduce doctor bills (and insurance premiums).

As regards financial wellness, the notion is that bad financial health contributes to (and/or causes) a bevy of woes: stress, which can lead to things like lower productivity, bad health and higher absenteeism, and even a greater inclination toward workplace theft, not to mention deferred retirements by workers who tend to be higher salaried and who have higher health care costs.

But if the rationale is straightforward enough, and the interest somewhere between intrigued and highly committed, plan sponsors still have some questions that merit addressing.

What do you mean by ‘financial wellness’?

“Financial wellness” is a term widely bandied about these days, and by many different firms (and advisors). Unfortunately, it is a concept that is being applied somewhat inconsistently. I’ve heard stories of folks who affix it to practices that are little more than glorified enrollment meetings, to the simple inclusion of an “outcomes” analysis to the retirement plan report, to a full-blown series of workplace seminars on topics ranging from budgeting to estate planning.

So, the first question that needs to be answered is “What do you mean by financial wellness?”

What difference will it make?

The answer to the first question will, of course, have a great deal of bearing on this one. Naturally, the more modest the scope and scale, the less impact, but a lot depends on what issues the program attempts to address, not to mention the demographics (and overall financial well-being) of the workforce to which it is being applied.

Still, even if a comprehensive impact assessment can’t be completed without the collaboration of the plan sponsor, it’s important to be able to at least quantify an estimate of the potential impact(s), whether it be increased participation, improved deferral rates, or even just higher satisfaction with the program(s).

How long will it take/last?

Common sense suggests that financial wellness is a process, not an event, and one that, run well, may well run for some time following its introduction. Nonetheless, plan sponsors will, if not at the outset, at some point during the program, have some interest in knowing just how long until they can expect to see results.

How much will it cost?

Obviously, there will be a relationship between the nature and scope of the program and its cost. Anecdotally, there seems to be a fair amount of skepticism among plan sponsors – particularly on the HR side – of the cost-effectiveness of these programs. It is therefore worthy remembering that there is an “I” in ROI, and that plan sponsors will be interested in knowing what it is (or might be).

Who pays for it?

Once again, while the answer may well depend on the program envisioned, to the extent this represents new expenditures, how it will be paid for may well impact the scope and/or timing. Plan sponsors may be able to consider covering it out of general funds, but, depending on the nature of the program components, it might also be appropriate to consider tapping into health plan budgets, communications, or even retirement plan assets.

How will you measure success (or lack thereof)?

The good news is that ROI is increasingly the lead selling point in presenting these programs, and the “return” will almost certainly include some quantification, some combination of measurable deliverables. Of course, some of the deliverables of a financial wellness program are less quantifiable, but even in those situations, worker surveys can provide insights.

The bottom line is that a shared understanding and appreciation of the desired outcomes will go a long way toward achieving not only financial wellness – but customer relation wellness as well.

- Nevin E. Adams, JD

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