Balancing Benefits: Assist Employees in Managing Family Budget Allocations

Families and individuals across the U.S. are feeling the strain as rising living costs, soaring health insurance premiums, and the growing demands of retirement planning stretch household budgets to their limits. These challenges are reshaping financial priorities and forcing them to seek smarter, more sustainable solutions to secure their future. Employees often face difficult decisions about allocating their limited financial resources to meet these obligations while maintaining economic stability. 

How can HR help employees make the best choice regarding benefit expense allocations? One way is for employers to strategically develop total rewards packages based on a full under-standing of employee demographics and needs.

Benefits Take a Bigger Bite Out of Budgets

It’s no wonder that employees’ financial stress is on the rise: In 2024, the median household income in the U.S. was $80,610, according to the U.S. Census Bureau, but the average annual health insurance premium for family coverage was $25,572, according to the Kaiser Family Foundation, 2024. During this time, U.S. households also spent an average of $9,995 on retirement contributions and savings. Meanwhile, employees now think they need much more money to have a comfortable retirement than they did just a few years ago.

This data clearly shows the financial burden benefit expenditures can place on employees. But the good news is that through better support, communication, and education, employers can empower employees to pick the best options and mitigate personal financial stress.

Employers’ Role in Supporting Financial Decision-Making

Employers have a critical responsibility to design proactive strategies that support employees. Some cost-effective methods include providing clear and open communication regarding benefit options, improving financial education, and optimizing retirement plans.

    Clear and transparent communication. Benefits education is the foundation of a successful total rewards strategy, but research finds that employers’ education efforts are falling short. The majority of employees don’t understand what benefits options are available, how they work, or which choices may be right for them and their families. A 2024 LIMRA survey found that just 54% of employees said their employer communicates well about benefits. And a 2023 MetLife studyfound that 54% of all employees said they wish they had personalized benefits recommendations, while half would feel more cared for if their employer improved its benefits communications.

Employees need to understand the actual value of the benefits offered to them, how these benefits work, and what costs they may incur. Understanding their options can also help employees make better choices for their budget. Benefit guides, vendor webinars, consultations, and regular emails exploring available benefits (and how they might improve employees’ financial peace of mind) can all help employees fully understand their benefit packages.

    Personalized financial wellness programs. Financial wellness and education programs equip employees to manage their household finances better, including benefit expenses. Access to budgeting tools, financial counseling, and savings and investment education gives employees financial freedom through informed decision-making.

Member Resource: Designing and Managing Wellness Programs

    New SECURE Act 2.0 provisions. The SECURE Act 2.0, enacted on Dec. 29, 2022, introduced several provisions to improve employee retirement savings outcomes. Several of the law’s provisions have been rolled out, so employers should evaluate the following changes and design their plans to maximize their employees’ benefits.

•  Automatic enrollment: Section 101 of SECURE 2.0 requires 401(k) and 403(b) plans to enroll newly eligible employees automatically.
• Emergency savings accounts: SECURE 2.0 allows plan sponsors to introduce an emergency savings component to their retirement plans. Employers can automatically enroll non-highly compensated employees (those earning up to $150,000 annually) in an emergency savings account, with any contributions made on an after-tax basis. Employee contributions are limited to 3% of pay up to $2,500 per year, with any employer match capped at $2,500 per year. Additionally, participants can withdraw up to $1,000 for emergency expenses without penalty before they reach age 59½. These participants have up to three years to repay the withdrawal.
• Increased catch-up contributions: Section 109 increases the contribution limits to the greater of $10,000 or 50% more than the regular catch-up amounts starting in the 2025 plan years for workers ages 60-63.
• Student loan repayment contributions: Section 110 allows employers to make matching contributions to a retirement plan based on the amount of an employee’s monthly student loan repayment, rather than the amount of the participant’s contributions to the retirement plan. This can enable employees who are paying off student loans to also save for retirement. Typically, they lag behind their peers in overall retirement contributions.

Employers have a responsibility and an opportunity to provide the support employees need to make informed decisions about their personal finances. By doing so, employers can reduce stress that inhibits productivity and overall wellness. Fostering supportive benefits environments is a critical need and should be a high priority for employers.