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Retirement Plans

Addressing Financial Stress in the Workplace

Companies have long realized the value of having healthy employees, and programs aimed at increasing wellness have morphed from recruiting tool to must-have corporate offering. However, a key aspect of employee wellbeing has been overlooked—financial wellness.

Companies have long realized the value of having healthy employees, and programs aimed at increasing wellness have morphed from fad recruiting tool to must-have corporate offering. But although company-sponsored gym memberships are now de rigueur and walking meetings are no longer the purview of an erratic CEO, a key aspect of employee well-being has been largely overlooked. Financial wellness is the new frontier—and a key workplace trend—in getting employees as “fit” as possible.

“Clients are looking at wellness more broadly—beyond quitting smoking or going on a diet,” says Phyllis Klein, Senior Director, Consulting Services Group at CAPTRUST. “Offering programs aimed at promoting financial wellness benefits a company because it helps employees have more confidence in their financial decision-making process. When they go through a financial wellness interaction, they come away with answers.”

“We found that what our employees needed was some basic education, this having been their first opportunity to speak with someone who’s qualified to guide them…and lay out their financial goals for the future,” says Renee Shore, Manager of Wellness and Employee Assistance Programs at Tidelands Health, which has about 2,000 employees. “They’d never had that opportunity before.”

The concept of financial wellness sounds nebulous. It can be evaluated by some quantifiable factors, but others are harder to measure: satisfaction with one’s financial situation; behaviors like saving and budgeting; and attitudes, knowledge, and even confidence surrounding finances.

To add to the confusion, there are as many paths to financial wellness as there are people, making a company financial wellness program seem especially daunting.

“We have right now four generations in the workplace,” says Klein. “Baby boomers have a different view of savings and retirement than millennials do. That’s part of the problem. It has to be personal, and it’s hard to personalize across all these generations. And then, is it good enough just to educate people? Or do you have to actually ensure they take some positive steps?”

With no one-size-fits-all approach to financial wellness, businesses must grapple with what kind of program to roll out, whom to target, what messages to send them, and how involved to get in their employees’ financial lives.

The Tolls of Financial Stress

Diminished financial wellness takes quite a toll on American businesses in the form of absenteeism and lost productivity: 17 percent of employees surveyed in 2016 by PwC said they were less productive at work because of financial stress. On a 2014 survey by the Society of Human Resource Managers (SHRM), just 4 percent of employees answered that financial stress had “no effect” on their work performance.

For individual workers, the anxiety of dealing with financial challenges, worrying about ongoing student debt, or struggling to prepare for upcoming retirement affects relationships, makes it hard to focus, and even takes a physical toll. PwC’s 2016 survey revealed 28 percent of employees said financial stress had affected their health.

Employees around the country are increasingly likely to request a defined contribution plan loan or hardship withdrawal, eroding their retirement savings to pay for current obligations. A full quarter of the workforce surveyed by benefits consulting firm Aon in 2015 had an outstanding loan.

And the problems aren’t going anywhere. Aon’s report also revealed that the median retirement plan balance at the end of 2015 had slipped several thousand dollars from the year before, and PwC’s survey revealed a “downward slide in many of the key indicators of employee financial wellness.” Millennials, who are today the largest generation in the workforce, are especially “financially fragile” according to a survey of more than 5,500 of them by PwC, meaning they are not able to cope with midsize shocks like a major car repair or emergency room visit.

Workplace Medicine for Financial Ills

Employers are turning to financial wellness programs as an antidote for these damaging levels of stress. But what kind of approach a business takes matters.

“It’s one thing to give out information,” Klein says, but “there has to be buy-in from the company, and they have to position it as a benefit. When we see clients get behind it, it’s very, very successful. Where it’s just something offered, where it’s just marketing to employees, the take-up rates are halved.”

Klein says companies need to go beyond the tried-and-failed approach of simply pointing employees toward company-curated financial literacy resources. Most workers, even those who need them the most, won’t read them independently or change their behaviors as a result.

Educating employees about how they can reduce their debt, create a budget, manage their assets, and plan for the future is critical, but it isn’t enough. Companies getting on board with the new generation of financial wellness programs are increasingly offering not education but inspiration.

They assist employees in choosing wise investments, repairing bad credit, budgeting and saving, and planning for retirement, medical expenses, or education. They offer employee assistance programs, privacy security and fraud protection, and even home-buying seminars. Successful financial wellness programs encourage workers “to make better choices in both their general financial planning and specific financial decisions,” according to SHRM.

For Tidelands Health, engaging its employees in their own financial wellness was key.

“Education is one portion of it, but advice is what takes general information sharing and personalizes it,” says Shore. “Our employees got a solid foundation, they learned the language, they learned how to talk with their advisor and contribute to the conversation.

“It was that magical combination of the education and the advice that allowed them to take what they had learned and apply it,” she says.

No Magic Bullet

Today there are a host of vendor services all along the spectrum, from technology-driven online services to people-driven solutions that offer in-person, individualized counseling.

The major retirement plan recordkeepers step in with proprietary programs, facilitate third-party services, or prenegotiate prices for clients. Other companies turn to advisory organizations like CAPTRUST to provide independent experts their employees can rely on for individualized evaluation and counseling. CAPTRUST offers educational resources but also face-to-face advice meetings where a retirement counselor walks an individual through a personalized process to help him or her prepare for retirement.

“Our advice offering can be an integral part of a well-executed end-to-end wellness program,” says Scott Matheson, CAPTRUST’s Defined Contribution Practice Leader. But he encourages companies to consider a multipronged approach to an issue with so many faces. “The good news is that today there are many tools employers can take advantage of as they build a wellness program. Advice is just one arrow in the wellness quiver,” he says.

In 2016, SHRM reported that 27 percent of organizations offered one-on-one financial advice to employees, and 22 percent offered group or classroom financial advice.

“People want affirmation of the decisions they’re making or someone they can ask questions of,” says Klein. “The idea that people can talk to us, even about things other than retirement planning, is something that adds value.”

Some programs incorporate incentives to boost participation—an effective strategy according to 70 percent of employers surveyed by Bank of America Merrill Lynch in 2015. Others use opt-out strategies or commitment contracts. Perhaps most importantly, successful programs make it clear that financial wellness is something worth investing in, both for individuals and for the company.

At Tidelands Health, for example, financial wellness was added to the already robust wellness program, which employees must participate in if they want to receive Health Reimbursement Arrangement credits. They saw 75 percent of the benefits-enrolled population complete a financial wellness call and create a retirement analysis.

“At Tidelands, we like to see that curve coming and stay ahead of it and lead the pack,” says Shore. “This is the wave of the future for wellness programs.”

A Personalized Approach

Because businesses have overemphasized financial education without seeing much impact for their employees, workplace wellness programs increasingly provide a more differentiated approach: targeting employees with the information and guidance they need for specific decisions or challenges they’re facing right then.

Considering how unique every worker’s financial situation and goals are, this kind of strategy makes sense. A twenty-something employee with credit card debt needs something different than a thirty-five-year-old concerned about saving for his children’s college tuition, or a fifty-five-year-old who wants to make sure her asset allocation makes sense as she saves for retirement. Gender, educational, and other differences apply, too.

“For a financial wellness initiative to be successful, the employee has to feel like it’s personalized to them,” says Klein. “The whole idea of wellness means different things to different people. And what makes me feel ‘well’ isn’t what will make you feel ‘well.’”

Leading-edge companies will likely break down their messaging by platform, too, targeting millennial employees on social media and older workers with face-to-face interactions, for example.

Companies that get financial wellness initiatives right will see returns on their investment: Workplace financial education programs have a return on investment of up to 3 to 1 by some estimates, according to Forbes.

And while SHRM says only 18 percent of employers leverage their benefits programs as a retention or recruitment tool, organizations that do “frequently cite their retirement savings and planning benefits as a means of keeping or attracting workers.”

Close to 90 percent of the program participants at Tidelands Health approved of the financial wellness program it implemented, according to Senior Vice President and Chief Human Resource Officer Jan Harper. No one surveyed said they wouldn’t repeat it if given the chance.

“It’s not just putting up good numbers,” Harper says. “It’s what those good numbers represent: that our employees are taking their health more seriously and that they’re going to be collaborative partners.”

“We hear from participating employees: ‘Nobody ever talked to me about this before,’” says Klein. “It’s helping resolve some unanswered questions for folks. We hear from our employer clients that they value the benefit, they value the interaction, and, if they’re making good decisions, it can help remove one stressor in their life.”