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Leveraging employee financial wellness programs in your benefits strategy

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American workers are stressed, and a lot of their stress may be related to money. Employers can support them by providing employee financial wellness programs that help workers manage their money and take control of their finances.

Why Employers Should Care About Financial Wellness

According to Capital One, 73 percent of people say their finances are a major cause of stress. To make matters worse, people who are stressed about money are more likely to put off health care needs. In other words, financial stress isn’t just a mental health issue – it’s also a physical health issue.

Workers who are stressed about money may be unable to focus because they keep thinking about their financial problems. They may experience the negative health effects of stress, which, according to the Mayo Clinic, can include everything from sleep problems and a weakened immune system to a lack of motivation and memory problems. These problems could cause employees to miss work, reducing their productivity.

Workers who are stressed about money may even end up quitting. This could be because they find a job that pays better, but it could also be because they decide to move to a less expensive location. In many cases, this involves moving back in with parents. According to Pew Research Center, the number of 18- to 29-year-olds living with their parents increased during the COVID-19 pandemic, peaking at 52 percent in July 2020.

Employers who want to keep their employees productive and focused on work need to take financial wellness seriously. In doing so, employers also set themselves apart from their competition in today’s tight labor market.

Developing an Employee Financial Wellness Program

Employees typically look for competitive compensation, but a good salary alone isn’t necessarily enough to ease financial difficulties. According to a 2023 survey from the Lending Club, 60 percent of Americans are living paycheck to paycheck. Among people earning more than $100,000 a year, 49 percent live paycheck to paycheck. In 2022, only 42 percent of the higher earners lived paycheck to paycheck, suggesting that American households are increasingly worse off financially.

Financial wellness benefits can help employees tackle their money challenges. However, there are many types of personal financial wellness benefits, each catering to unique needs. When creating your organization’s financial wellness benefits package, consider the specific financial challenges impacting your employees. Most likely, you have employees struggling with a variety of problems and working toward different goals. This means you may need a diverse financial wellness program rather than a one-size-fits-all solution.

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Retirement Savings Programs

According to Bankrate, 56 percent of U.S. workers say they are behind on retirement savings and 37 percent say they are significantly behind. Retirement savings programs are a staple of employee benefits – many employees and job seekers want robust offerings to help them catch up.

Offering retirement benefits also makes financial sense because they often come with tax incentives. According to the Internal Revenue Service, employers can enjoy the following advantages when they offer a retirement savings plan:

  • Tax-deductible employer contributions
  • Assets that grow tax-free in the plan
  • Tax credits and other benefits for starting a plan that can reduce the employer’s costs
  • Improved talent attraction and retention, leading to reduced hiring and training costs

The U.S. Department of Labor explains that the Employee Retirement Income Security Act (ERISA) covers two main types of retirement plans: defined benefit plans and defined contribution plans.

  1. Defined benefit plans promise a specified monthly benefit at retirement.
  2. Defined contribution plans involve employer and/or employee contributions (often at a set rate) but do not promise a specific amount of benefits upon retirement. A 401(k) plan is a popular example of a defined contribution plan.

Student Loan Repayment Programs

While some workers are focused on saving up for retirement, others are preoccupied with trying to pay off their student loans. According to the Education Data Initiative, 43.6 million people have federal student loan debt. The average balance is $37,718.

Federal student loan payments are resuming in October 2023 after a multiyear pause due to the COVID-19 pandemic. Many borrowers are struggling to fit these large payments into their budgets again, and offering employee student loan repayment benefits could help to reduce this stress.

The IRS says employers can use education assistance programs to help pay workers’ student loans. This is a new option that went into effect on March 27, 2020, and is set to end on December 31, 2025, assuming it’s not extended.

Voluntary Insurance Benefits

Insurance products can help workers plan for financial setbacks, providing them with peace of mind. A robust voluntary insurance benefits program is a sensible way to let employees select the products that address their concerns. Discounted group rates and simplified underwriting are available for many products. Plus, employers can require workers to pay some or all the premium costs through payroll deductions.

  • Life insurance is a staple of financial preparedness. Workers with young children are especially likely to be interested in this, but other workers may also want coverage.
  • Disability insurance is another important product for financial health. Employers can offer short- and long-term disability insurance.
  • Critical illness, personal accident and cancer insurance can help beneficiaries manage the various costs associated with a major health problem, including out-of-pocket health care expenses and missed work.
  • Pet insurance will appeal to many pet parents. Although veterinary care doesn’t tend to be as expensive as health care for humans, an emergency vet visit can still run hundreds or even thousands of dollars. Pet insurance can help with these costs. In a survey from Nationwide, 32 percent of pet owners said pet-related benefits would influence their decision to stay at a job or go elsewhere.
  • Identity theft protection can help employees avoid financial nightmares. According to Consumer Affairs, recorded instances of identity theft have surged by 584 percent over the last 20 years. Identity theft protection programs often provide credit monitoring and alerts to help people catch any suspicious activity early. They also offer identity restoration services and reimbursement for related costs.

Financial Planning, Tools and Education

Sometimes, employees need guidance on how to budget, save, pay off debt and reach their financial goals. An employee benefits package that includes financial planning tools and education can help with this.

  • Financial coaching can help employees work toward their financial goals, whether they’re trying to pay off debt or save for their kids’ college or their own retirement. Offering this as part of your financial wellness program could be appealing to workers who would like guidance but aren’t sure they can afford professional financial assistance themselves.
  • Digital tools are another great financial wellness solution for employees. For instance, you can offer calculators to help employees determine how much money they need to set aside each paycheck to reach their goals or budgeting tools to help them manage their monthly and weekly expenses. For example, tools like LearnLux or Mariner Financial Wellness can give your employees access to financial education, coaching and goal-setting. As there are many platforms out there, you’ll need to do some research to find one that meets your company’s needs and budget.

Employee financial wellness programs are becoming an increasingly critical part of any well-rounded employee benefits package. Higginbotham can help you put together an employee benefits package that meets the needs of your workforce. Talk with a member of our employee benefits team and discover how we can help you transform your employee benefits offerings.

Not sure where to start? Talk to someone who wants to listen.

A great plan starts with a conversation. Let’s talk about what you need.

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