8 Things to Know About the State of Financial Wellness


For all the buzz around financial wellness, a new survey suggests there is a long way to go.

These days there’s not much argument against the premise behind pursuing financial wellness. The notion is that bad financial health contributes to (and/or causes) a bevy of workplace 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 paid and have higher health care costs.

But if there is little argument that financial wellness is a worthwhile goal for workers – and one worth supporting by employers – the recent Financial Wellbeing Employer Survey from the Employee Benefit Research Institute (EBRI) suggests that we have a ways to go.

Here are some key takeaways from that survey of 250 employers:

1. HR is leading the charge.

The most commonly cited primary champion for financial wellness was Human Resources (55%), followed (distantly) by a senior executive (21%). Human Resources was also cited as the most common secondary champion of these initiatives (26%). Fittingly, then, “communication from HR” was the most commonly cited means of encouraging employees to use financial wellness initiatives (39%), more than double the next highest (monetary incentives, at 19%).

2. The need tends to be gauged by traditional measures.

The most common approach reported in evaluating a need for financial wellness was examining existing employee benefit/retirement plan data such as deferral rates, average balances and loan frequency/amount. Nearly two-thirds of respondents (63%) had taken this step; a distant (48%) second was surveying workers.

Dead last? Creating a financial well-being score or metric (14%).

3. Motivations vary by employer size.

Midsized employers – those with 2,500 to 9,999 employees – were most likely to say they offer these initiatives to improve their workers’ overall satisfaction (67%).

However, the largest employers (>10,000 employees) were most likely to cite increased employee productivity (37%) – and being a differentiator from their competitors (27%).

Size also matters in availability; three-quarters of firms with 10,000 or more employees offered financial wellness initiatives at the time, compared with (just) 49% of smaller firms.

4. Measures of success are varied – and (still) somewhat subjective.

Improved overall worker satisfaction scored as the top measure of financial wellness initiatives (39%), (very) closely followed by reduced employee financial stress (38%). Worker satisfaction with the financial wellness initiatives and improved employee retention tied for third place (33% each).

However, “improved workforce management for retirement” – cited frequently as a key ROI attribute – was mentioned by a mere 10%.

5. Cost is a key consideration.

Cost was the top consideration (50%) cited by employers in determining whether to offer financial wellness benefits – though a close second was interest among employees (46%).

Little wonder that cost loomed large since more than two-thirds (68%) of respondents stated that current or prospective financial wellness initiatives are or would be employer-paid – a figure that increased to 85% among those with a high level of concern about the financial wellness of their workforce.

6. Most employers are not (yet) spending a lot.

While there was a wide range in cost cited for financial wellness initiatives (bear in mind, there was also a wide range in the definition of what constituted a financial wellness initiative), 43% reported the annual cost per employee of current financial wellness initiatives as $50 or less – and a full quarter (26%) did not know the cost.

On the other hand, the one in five firms that defined their financial wellness programs as “holistic” cited an average cost of more than $500 per employee.

7. But then, the programs’ scope is (still) pretty modest.

Only about 1 in 10 of those surveyed offer emergency savings vehicles or accounts, debt management services, or student loan repayment subsidies or consolidation/refinancing services.

Employee discount programs were the most common financial wellness benefit offered. These include cell phones, travel and entertainment; tuition reimbursement; and financial planning education, seminars and webinars.

8. We’ve only just begun.

Despite all the “buzz” around the topic, a majority of the employers surveyed characterized their programs as pilot programs (38%) or periodic or ad hoc programs (32%).

Even among employers with a high level of concern about the financial wellness of their workforce, only about a quarter (27%) characterized their financial wellness initiatives as “holistic.”

A long way to go, indeed.

- Nevin E. Adams, JD
 
See also: “What Plan Sponsors Want to Know About Financial Wellness” and “Building a Bottom Line on Financial Wellness.”

Comments

Post a Comment

Popular posts from this blog

Do Roth and 401(k) Pre-Tax Holders Really Spend Differently?

Image
An interesting—and somewhat counterintuitive—report came out last week, one that cast doubt on the “common wisdom” regarding Roth versus traditional pre-tax savings. The assumption underlying the research [i] was that those who had not yet paid taxes on their savings (the traditional pre-tax savings) would be hesitant to tap into those savings and trigger taxes, certainly more so that individuals that had already paid those taxes. Instead, the research suggested that the opposite occurred; that individuals who had saved on a pre-tax basis actually withdrew more/sooner—but with a twist.  This they hailed as good news. They noted that the research suggests investing in a CT (current-taxed, or Roth) plan could help ease concerns about outliving funds—because they spend at a lower rate (though they saw this as a negative for those who saved on a deferred tax (DT) basis).  They even managed to find a silver lining in the “cloud” of faster spending by the pre-tax crowd beca
Read more

Is the 401(k) Really a ‘Horrible’ Retirement Plan?

Image
  A recent “news” post about a blog post finds some curious “faults” with the 401(k). The news item carried the provocative title “ ‘Rich Dad’ Robert Kiyosaki Reveals Why the 401(k) Is a ‘Horrible’ Retirement Plan .” It originally ran on GoBankingRates.com, but was subsequently picked up in syndication on Yahoo Finance (at least). For the uninitiated, Robert Kiyosaki is one of those “I’ll help you get rich the way I did” types, providing that road map via books (notably “Rich Dad, Poor Dad”) and seminars. He offers comparisons to decisions made by his dad (poor dad) in contrast to those of the father of his best friend (rich dad).  Suffice it to say that his dad worked hard and saved the old-fashioned way—which is NOT his advice to you. That’s included previous pearls of wisdom like “ Why Saving Money is the Wrong Way to Prepare for Retirement .” Apparently rather than saving for retirement, we’re supposed to “look for an investment that will pay for your desired standard of living. Ma
Read more

Shifting the 401(k) ‘Balance’?

Image
A week or so ago, I came across an announcement that IBM was making changes to its 401(k). More specifically that, effective next year they were going to replace their matching contribution in their 401(k) with an employer contribution to a cash balance plan. [i] In the days that followed, the news was picked up in a couple of different trade publications—the implication being that this might be signs of a new shift in plan design. Heck, even Teresa Ghilarducci weighed in , championing the “evolution” to a defined benefit structure from the “flawed” 401(k). She never misses an “opportunity.” Readers here are likely familiar with the basic concepts of a cash balance design. Technically a defined benefit plan, it’s generally referred to as a “hybrid” because it also has a number of participant-friendly aspects that it shares with a defined contribution plan, notably an account balance (though it’s a “notional” one) that is shared with participants. The benefits accumulate
Read more