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May 13, 2014

New Wellness Plans: for Employee Finances

Summary:

Companies are rolling out wellness programs focusing on employees' financial health, to combat lower productivity and greater absenteeism.

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Employee wellness programs no longer just mean healthy office potlucks, pedometers and stress balls. These days, more companies are rolling out wellness programs focusing on the financial health of their employees. The change in tack comes as American workers are struggling to keep their financial houses in order. Companies are acting because financially stressed workers can mean lower productivity and greater absenteeism, among other problems. But, to be effective, a financial wellness program must address the individual needs of workers and their different learning abilities. It also must actually boost workers’ financial management skills, and keep them engaged over the long term.

The Opportunity

In January, benefits consultant Aon Hewitt released a survey of 400 national employers representing nearly 10 million workers. Three-quarters of respondents said they are “somewhat to very likely” to implement a program this year targeting their workers’ financial health and educational needs. Previously, the survey found, companies were most concerned about whether workers were participating in 401k plans. Today, however, employers are expanding their focus  to help workers improve their overall financial health.

“A growing number of companies are offering tools and services to help employees make smarter financial decisions, which can help improve employee engagement and productivity as workers focus less on financial stressors,” Aon Hewitt noted. The survey also found that “employers understand that workers can’t adequately save for retirement if they don’t have their financial house in order.”

These findings come after other surveys have highlighted how financially stressed workers can zap a company’s bottom line: lower productivity, unscheduled absenteeism, turnover and rising health care costs from stress tied to basic money management. It isn’t known if employers are just  becoming aware of these facts — or if it’s the growing fallout that is spurring employers to seek financial wellness programs. Regardless, it’s clear employers want a solution.

The History

Why did financial wellbeing become such a hot workplace issue? The answer is simple. Unless you were raised in a home that practiced and taught sound financial management skills, it’s unlikely you possessed these skills by the time you entered the workforce. Think of your own primary educational experience. Was it void of education in personal financial management? Most would answer, “Yes.”

Consider “the Greatest Generation,” who fought in World War II and kept the home front intact. These men and women worked for companies that provided pensions ensuring a comfortable retirement. They lived in a time when a successful and peaceful life wasn’t dependent on acquiring more things. This generation lived through the Great Depression, resulting in a lasting emphasis on frugal living. For most, this experience was their financial education; but they were unprepared for teaching the next generation about managing financial complexities.

Baby Boomers raised by this generation entered the workforce when the economy was growing. Jobs were plentiful, and so were mortgages, auto loans and credit cards. For many, living with debt became the new norm; however, understanding how to manage that debt was largely dependent on the family environment in which a person grew up.

Generation X saw even greater access to debt. In fact, as if the allure of accumulating more than their parents wasn’t enough, the cultural message suggested that people should spend their way to happiness. Lacking financial management education, many Gen Xers found themselves leaning on employers to solve their personal financial challenges. They requested 401k loans and hardship withdrawals, payroll advances, etc. Most of America’s working class were living beyond their  means and using the equity in their homes to bankroll their lifestyles.

But then the stock market crashed in 2008, resulting in massive losses in retirement and other types of investment accounts. Millions of workers lost their jobs, and many more suffered losses in income. And, in the blink of an eye, the equity in their homes was gone. In fact, a big percentage of these workers suddenly found they owed more on their mortgages than their homes were worth. For most among the working class, the new reality meant living with more debt, less income and fewer assets.

Even now, the Millennials approach the workforce with similar cultural conditions as Gen Xers. But there are two added wrinkles. First, Millennials are entering a more competitive job market. Second, they do so with much higher expectations of what employers will do for them.

Economists agree that navigating our financial system is becoming more complex. In each of the last three years, the American Psychological Association has found personal finances to be the leading cause of stress in this country. And medical research continues to point to stress as a leading cause of disease. We aren’t suggesting that financial wellness programs are the only answer to these problems. But  the facts suggest such an approach is very important to dealing with them.

The Solution

Employers have made it clear they plan to help employees manage their finances. In fact, 70% of employees have indicated they prefer to get such assistance through their employer.

What does the right solution look like? For starters, companies must actively promote their financial wellness programs and ensure they’re readily available to all employees. There’s a misperception that wealthier workers have less need for such assistance. Unfortunately, very few people are immune to economic hurdles: The problem transcends income, job classification and educational background.

The right solution will offer a multidimensional learning format, given that people have different learning styles and preferences. The solution also needs to be communicated in a way that appeals to most people.

In addition, the right solution will seek to keep workers engaged over the long term. Establishing and increasing basic knowledge of personal financial management is mandatory. However, given the ebb and flow of life and its changing circumstances, workers will continue to encounter new financial conditions. As they do, having an objective financial voice available to them will ensure that past mistakes aren’t repeated.

How to gauge success?

Workers will no longer get distracted by their financial challenges, thereby increasing their productivity and decreasing unscheduled absences. Workers who get spending and debt under control are saving enough for retirement — rather than extending their employment years and expanding employers’ costs. Helping workers make better healthcare choices in terms of benefits selections as well as lifestyle decisions also will help with costs.

Overall, financial wellness programs will have a positive impact on workers’ quality of life — as well as companies’ bottom lines.

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About the Author

Brad Barron founded CLC in 1986 as a manufacturer of various types of legal and financial benefit programs. CLC’s programs have become the legal, identity-protection and financial assistance component for approximately 150 employee-assistance programs and their more than 15,000 employer groups.

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