In an October 2020 survey released by the National Endowment for Financial Education, 84% of Americans said COVID-19 is causing stress on their personal finances. More than half of those surveyed said not having money enough saved for emergencies, retirement, college and other uses ranks among their top financial concerns.
When employees are stressed and losing sleep over an issue, it affects their work, most notably through decreased productivity and absenteeism. This includes financial-related stresses. A poll conducted by Workplace Options found 40% of working Americans spend more than three hours of their workweek dealing with personal financial matters, and more than one-third of them admit to having missed at least part of a workday due to a personal financial situation.
Employees who are not financially secure are also often not able to retire on time. And, because older employees typically have more expensive insurance and higher salaries than their younger counterparts, delayed retirements lead to higher costs for the employer.
The ongoing financial health of employees is an issue facing every business, even those that were not adversely impacted by COVID-19. While the pandemic has certainly accelerated financial concerns for many Americans, this is not a new problem. In fact, a study conducted in 2017 — long before any of us knew the term “social distancing” — found that more than half of Americans couldn’t come up with $500 in an emergency, and 40% of them had credit-card debt they couldn’t pay off.
Americans are vastly underprepared for financial emergencies, and they have been for some time. The pandemic brought this into clearer focus and has spurred many people to take a more proactive approach to managing their finances and planning for the unexpected.
What Is a Financial Wellness Plan?
As more Americans are evaluating their financial situations and ways to improve their outlook, a growing number of employees have begun looking to their employers for help in establishing and maintaining financial wellness plans. This “next generation” of benefits packages address overall financial wellness by teaching employees how to manage debt, save for emergencies and prepare for the future, and providing comprehensive products that range from retirement accounts to insurance plans and health savings accounts.
The most effective financial wellness benefits packages combine personalized, professional advice with technology. This mix of education, support and online tools enables employees to take control over their financial outlook without requiring employer resources and allows them to interact directly with financial experts for help in areas where they need it most, from retirement to debt management or credit questions. Employees are able to set personal goals, use automatic transfers to save money and manage debt, and build new financial habits with guidance and encouragement from financial experts. As employees’ needs evolve throughout their tenure, they can initiate check-ins with an advisor through their plan, or the employer can set up regular companywide check-ins to keep everyone on track.
This individualized approach to financial wellness can help keep employees engaged and incentivized to improve their financial outlook without requiring additional employer time or resources. Employers who provide comprehensive financial wellness plans may also enjoy a competitive advantage, boosting their employee recruitment and retention rates.
Many employers would like to help their employees become more financially secure but aren’t sure where to start or how to enhance their company’s existing retirement plan. Here are a few popular options:
Retirement accounts. Common types include traditional 401(k) accounts, SEP IRAs and simple IRAs. Eligibility for these accounts may vary based on the company’s employee headcount and individual employee earnings. Other differences include withdrawal penalties, deferral limitations and federal filing requirements for the employer.
Health savings accounts. These are long-term savings accounts specifically for healthcare costs that are paired with low-premium, high-deductible insurance plans. Contributions are not taxed and earn interest.
Personal financial fitness tools. Technology offerings give employees a holistic view of their finances and provide guidance to help them build their financial confidence. Employees can access their retirement accounts, track their emergency savings, create a personalized budget and manage debt using one tool, empowering them to take control of their financial future.
Retirement and benefits plans are numerous and confusing. Employers should try to learn the basics going in, ask a lot of questions and work with a provider who recognizes employees as individuals instead of plan participants.
Rob Schwister, Phoenix Metro market president at Alerus, oversees financial teams in Scottsdale and Mesa and leads business development activities throughout the metro. Schwister has more than 20 years of experience in financial services and a deep understanding of business trends in the Phoenix market. He currently serves as treasurer for the Arizona Bankers Association board of directors.