Employers Double Down on Financial Wellness, but Approaches Differ

Programs vary based on industry and workforce needs

Stephen Miller, CEBS By Stephen Miller, CEBS November 22, 2019
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Employers Double Down on Financial Wellness, but Approaches Differ

Fifty-three percent of U.S. companies offer financial wellness programs today compared to just 24 percent in 2015, according to Bank of America's annual 2019 Workplace Benefits Report. The findings are based on a nationwide survey of 996 employees and 804 employers that participate in 401(k) plans.

One reason for the increased focus on financial wellness: 55 percent of employees today rate their own financial wellness as good or excellent, down from 61 percent a year ago.

Employees who rate their financial wellness positively are more likely to feel they can effectively manage their day-to-day finances, they can pay bills while saving for the future, and their retirement savings are on track, Bank of America found.

The ways in which employers help employees to manage their finances—and how they measure the success of these efforts—vary greatly, however, according to research by nonprofit Employee Benefit Research Institute (EBRI) in Washington, D.C.

"Employers have different goals when it comes to employees' financial wellness, and often, it depends on their industry and employee demographics," said Lori Lucas, EBRI's president and CEO. For instance, student loan debt was more commonly cited as a top concern by respondents from the professional, scientific and technical services sector, but it was a lesser concern for respondents in the retail trade industry.

Nearly 250 benefits decision-makers at companies with at least 500 employees responded to EBRI's Employer Approaches to Financial Wellbeing Solutions Survey, conducted in June. "The four most common employer financial well-being initiatives being offered are quite traditional," Lucas said. They include:

  • Tuition reimbursement (64 percent).
  • Financial-planning education (60 percent).
  • Employee assistance programs (55 percent).
  • Basic money management tools (49 percent).

Other employer approaches to helping employees realize financial well-being vary in the survey results.

[SHRM members-only how-to guide: How to Design an Employee Benefits Program]

Approaches­ to Tackling Student Debt

Beyond the financial wellness basics, employers are focusing on workforce demographics to identify specific ways that workers are financially stressed, and then offering benefits and resources that address those needs, EBRI reported.

Employers whose workers are struggling with college debt, for instance, are offering a variety of student loan assistance initiatives. "We … see everything from student loan debt payment counseling, student loan debt assistance through 401(k) contributions tied to employees' student loan payment, debt consolidation/refinancing services and more," Lucas said.


Congress Could Enhance Education Benefits

The Society for Human Resource Management (SHRM) supports the Employer Participation in Repayment Act (H.R. 1043 and S. 460), which would allow employers to offer tax-free student loan repayment benefits to workers. In addition, the Upward Mobility Enhancement Act (H.R. 4849) would raise the maximum allowable tax-exempt tuition benefit from $5,250 to $11,500.

"Benefits such as these are instrumental as employers seek to recruit and retain talent in a competitive market," said Chatrane Birbal, SHRM's director of policy engagement. "SHRM has long advocated for strengthening and improving employer-provided education assistance."


Funds for Emergencies

To help employees who need cash to pay for emergencies, employee relief and compassion funds remain the top offering (44 percent), but the EBRI survey also found that many employers are matching contributions to an employee's personal account (35 percent) and offering payroll advances (33 percent) and short-term loans that can be repaid through payroll deduction (24 percent).


Saving at Work for a Rainy Day

A survey conducted by the AARP Policy Institute last year showed that 71 percent of employees would likely participate in a payroll-deduction emergency (or rainy day) savings program if their employer offered one, based on responses from 2,603 employees ages 25 to 64. The main reasons employees said they would participate were to save more money and to reduce stress.

The ability to make direct payroll contributions to an account would make 61 percent of employees more likely to enroll in this benefit. An employer match on payroll contributions would make 87 percent of employees more likely to participate.

According to Michael Webb, vice president at retirement plan advisory firm Cammack Retirement Group, employers can offer automatic savings into emergency savings accounts using payroll deduction, given that "the automation for retirement plan savings and after-tax savings is similar; thus, participants who are acclimated to one process are more likely to participate in both."

A reason to do so, he added, is that employees with emergency funds "are in a better financial position to save into the retirement plan [and] are far more likely to use those funds in an emergency instead of borrowing/withdrawing from their retirement plan, reducing plan leakage."

An emergency fund should be a separate account that employees can tap into when needed, but they won't see or touch regularly, advised Laura Gariepy, a financial writer at money management firm Charlie. "This will make it tougher to spend the money on other, less-dire situations."

This money can be put into a high-yield savings account, where it "will be safe, separate from [employees'] day-to-day finances, and will actually grow a little due to interest," she noted.

Measuring Success

The top ways that employers measure the success of their financial wellness initiatives, EBRI found, were:

  • Improved overall worker satisfaction (37 percent).
  • Improved use of existing retirement plans (31 percent).
  • Reduced employee stress (31 percent).
  • Improved employee retention (28 percent).

However, success measures differed by industry, the survey showed. For instance, respondents in the health care industry ranked improved overall worker satisfaction as a top factor in measuring the success of financial wellness initiatives, while reduced health care costs and improved employee recruitment scored high as a means of measuring success for respondents in the educational services industry.

Related SHRM Articles:

How 3 Employers Got Financial Wellness Results, SHRM Online, September 2019

Better Tailored Financial Wellness Programs Boost Engagement and Results, The SHRM Blog, February 2019

6 Ways to Measure the Success of Financial Wellness Efforts, SHRM Online, January 2019

Financial Wellness Perks Expand to Address Employee Needs, SHRM Online, June 2018

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