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Beyond the Paycheck: When Does a Financial Wellness Program Make Sense?

Corporate Wellness Magazine

Financial wellness programs can help employee wellness by reducing stress and helping employees take control of their life.

With wages flat and health care costs rising, employees are looking to their employers for answers to ease their financial ills. Employees tend to trust their employer more than they do their accountant or stockbroker, according to industry experts who provide financial wellness programs to employers.

“Employees have an increased concern or distrust about the financial services industry and employers have the leverage to provide a better value than what is on the retail market,” Liz Davidson, CEO, Financial Finesse, a financial education company based in El Segundo, California, explained. “Plus, employees want to become more educated on subjects beyond just the benefits available. They believe the workplace is their best financial services provider.”

As a result, employers have begun to implement financial wellness programs as part of the employee benefits offered within an organization.

“There has been an increasing shift of responsibility to employees and it is not just in the United States,” explained Betsy Dill, partner, U.S. Innovation Leader Retirement, Mercer, Inc., Los Angeles. “With the Affordable Care Act, employees are moving toward higher deductible plans, and this is part of an entire confluence of factors. People have to navigate an incredibly complex system.”

Mercer’s initiatives with employers was to help them recognize the necessity to meet diverse needs and diverse populations. Dill said their strategies are segmented but the chief goal is to educate employers on what they already offer, how that compares to other organization and how that utilization looks.

Financial wellness programs tend to be comprehensive in scope and cover topics from budget planning, debt reduction and elimination to retirement and estate planning. The goal for employees to experience financial well-being is where an individual has minimal financial stress, a strong financial  foundation consisting of little to no debt, an emergency savings fund and living below their means. Employers also work with employees on assisting with an ongoing plan that puts them on track to reach future financial goals.

“At Mercer, we help them see where there may be gaps and then take a deeper look at their workforce on how utilization of programs vary from segment to segment,” Dill said. “For example, we found that some of the employee population are in a high deductible plan and not utilizing health savings accounts, so we tell them they might want to utilize them. Just looking at a broad statistic doesn’t give the whole picture.”

Dill explained that they took financial wellness in an innovative direction, too. One strategy to boost retention on financial education among employees includes an effort similar to a childhood pastime—storytelling, but delivered through a dedicated microsite where employees are educated around a particular financial issue.

“We are connecting employees with information that is presented within a visual story where they become the main character of the story after selecting from a database of profiles of people who are like them,” she said. “It was a visual but clinical approach to helping educate and connect employees with where they are financially and where to go based on what is offered within the story.”

The key for employees is to frame the right program based on what the person and people in the story like them do, Dill added. “For employers, the idea is curation. If you have a higher paid worker, maybe they don’t need a critical component of insurance, and walking through these steps helps them frame the right program,” she said. Part of Mercer’s initiative includes featuring content where employees can click on a video that features someone similar to them, and then the next video screen describes how the benefits in their organization can be applied and what they need to do. Dill describes it as a call to action.

“The 800-lb. gorilla in financial wellness is not just about retirement plans,” Dill offered. “It is about understanding the workforce and moving the needle to create better engagement, which would reduce turnover. We need to be able to meet people where they are, and that means that it is understanding there needs to be some sort of personalization of the experience.”

When there is no financial well-being among employees, employers experience an increase in absenteeism, loss of productivity and an increase in illnesses by employees. Employers have indicated they are concerned, according to a 2015 Financial Stress Report by Financial Finesse.

Financial stress has been recognized as having an impact on a company’s healthcare costs. Over a two-year period, from 2010 to 2012, the report showed the cost of company healthcare spent on employees that have participated in financial wellness dropped by 4.5 percent while costs for employees that have not participated increased by 19.4 percent. The ROI study was conducted by a Fortune 500 company that uses Financial Finesse as its financial education provider and has a large-scale, multi-channel, award-winning financial wellness program in place for five years. Multi-channels include one-on-one sessions, an online financial planning center, workshops and webcasts. Lacking knowledge about financial education and experiencing stress as a result of not having a feeling of control over their finances, in particular retirement planning, also has lead employees to their employers for help.

The catalyst for increased employee financial stress came from the demise of employers offering defined benefit plans, also called pension plans. These were retirement accounts subsidized by employers, offered to employees, that guaranteed retirement income until death, and then possibly to a surviving spouse thereafter.

Employers can look for tell-tale signs to see if an immediate need for a financial wellness program is beneficial. Employees who take loans against their 401(k)’s, employees who request payroll advances and employees who are of retirement age but delay retirement are suspect to financial unwell-being.

“These people want to retire, can’t, and so they are not engaged in their work but still have to for financial reasons,” explained Davidson. “In manufacturing and construction industries, this is very common. We didn’t realize earlier how unprepared people were. When you look at, for example, work environments like manufacturing or construction—or even the hotel workers like bellmen who carry luggage—that is not what they want to be doing, and they are there, it takes a toll on their bodies to do the work, and they are financially stressed. Overall, employers have not been empowering employees, so there is a major drive now to provide financial education.”

For some employees, though, the point where employers and employees intersect in thought about financial well-being and security do not align. Employees want their employers to encourage them to save for retirement, but they are uncomfortable with the idea of having their employer tell them how to manage their personal finances. In a 2015 Towers Watson & Company survey, 41 percent of employees did not agree it was their employers’ business how they managed their finances. About 43 percent felt comfortable letting their employer take an active role.

“Employees need to keep in mind this is about the life you are living in terms of saving, investing, and planning,” Davidson offered. “Are those things interfering with your life? When financial stress is low, it is a good thing, as it shows you are placing some importance and thought toward financial wellness. But when you get into high degrees it is bad for the body,  marriages, and workplace performance.”

Financial well-being is a hot topic and one that was addressed at this year’s 7th Employer Healthcare & Benefits Congress in Orlando, Florida, September 27 – 29. Jeff Tulloch, vice president, PlanSmart® & Business Advantage, MetLife, New York City, presented with Charles DeSantis, associate vice president and chief benefits officer, Georgetown University, their  take on employer responsibility regarding financial wellness and how to implement this type of program.

“There are four steps to follow,” Tulloch explained. “The first is executive buy-in, a crucial step for wellness programs of all kinds. If the boss is not on board, no one else will be. The second step is to create a curriculum so you can be sure that all information is covered. The next step is to enable employee action, which means make the course from the curriculum available for employees to utilize. Finally, the last step is strong internal communication. If employees do not know the program exists, and have no idea of how it will help them, it will never be used.”

“You want to provide tools that are tangible to people,” DeSantis noted. “I refuse to look at this from an ROI perspective. If you do, you lose the value of the people. I’m not worried about the professors but the facilities people. They keep the lights on.” The presenters also explained that employers are focusing on economic issues like the state of the nation and the global economy, but perform little metrics on employee satisfaction. “These metrics could reduce absenteeism,” both Tulloch and DeSantis noted in their presentation. “Employees are now crying out for help.”

This stress is compounded with other startling facts, like how 41 percent of survey respondents live paycheck to paycheck. Or how 33 percent admit to making poor financial decisions, a figure which has to be higher, but respondents were too embarrassed to answer honestly. It comes as no surprise then that 49 percent of employees want access to information to help them be better financially, according to studies reported by MetLife.

By helping employees improve their financial wellbeing, employers stand to gain as well. Aside from the savings in healthcare spending due to reduction of stress, employers can also improve productivity. If an employee does not have to worry about their home being foreclosed on, they can focus on their work. An employees who takes advantage of a financial wellness benefit will know that the company care for them, and wants them to succeed—goodwill, as Tulloch and DeSantis report, that will go a long way in the future.

Still, responsibility by employees is pertinent to address and extends beyond receiving financial education.

“If the behavioral element is not addressed, employees will be more stressed no matter how smart they are,” Davidson said. “Financial literacy is part of the process but beyond that they need to tell themselves, ‘I need to set myself up for success’ and not stray from it.”

The way to develop a habit is when the reward center of the brain is activated—like getting people addicted to that feeling of progress. Accountability with a partner who is a planner through an employer financial wellness program helps offset poor money management habits that lead to high financial stress.

Fear, said Davidson, is not a motivator when it comes to money—worry, neither, although many do worry about finances, as her company surveys show. Financial wellness is more than creating a budget and contributing to a 401(k)—for employers, it could make sense for the bottom line.

Finding Financial Peace From The Workplace

SIDEBAR GRAPHIC - DAVE RAMSEYWhen people are sick, they seek a doctor. When people are financially struggling, they are often uncertain who to seek for advice. A broker? A portfolio manager? An accountant?

Looking to someone  to provide objective information is key so the real problems can be addressed and permanent change can take place.

Employers who recognize that incorporating financial wellness into their overall wellness programs are helping their employees nip at the stresses that sometimes illnesses bring on. Dave Ramsey, New York Times Best-selling Author, radio show host and founder of Financial Peace University and Ramsey Financial Solutions, explained the true definition of financial wellness. He knows how to get there. In his own quest toward financial wellness, all self-taught, he came to the realization that his money problems, worries and shortages began with the person in his mirror.

Employees are turning to their employers for financial advice as it is a natural progression now that defined benefit plans have dried up. Ramsey addressed this topic and more with Corporate Wellness Magazine.

Q: How would you define financial wellness?

A: First, I can tell you what it’s not. It’s not 70% of Americans living paycheck-to-paycheck. It’s not 64% of Americans unable to cover a $1,000 emergency without borrowing. It’s not half of Americans having less than $10,000 saved for retirement. These statistics are real and they’re frightening. This is not financial wellness. This is financial illness.

The average American pays out one fourth of their income to consumer debt payments. How much more could they save if they didn’t have any payments? How much could they invest in their 401K or add to their kid’s college fund? Financial wellness is more than just providing education. It’s positioning people to get on a financial plan that empowers them in a proactive way to take control of their money, eliminates debt and plan for the future.

Q: Why do you think employees are turning toward employers to help them with their financial problems? How do you think employers are responding?

A: Traditionally employers have helped their employees with programs to save for retirement, so turning to them for a more holistic approach to managing money is a natural progression. Employers are responding because they know that personal financial issues are responsible for lower productivity, higher turnover and higher health care costs. It affects the bottom line.

Q: What are the features within a financial wellness program that HR executives or CEOs should look to? Or avoid?

A: Look for a financial wellness program that focuses on changing behavior. We teach that personal finance is 80 percent behavior and only 20 percent head knowledge. What to do with money isn’t the problem; doing it is. Avoid programs that don’t address this issue head on because it’s at the heart of most people’s money problems. Look for a turn-key financial wellness program that walks people through each step through engaging content accessible anytime online.

Q: Do you believe that an employee’s financial challenges are all in their head? Why or why not?

A: Not at all. Financial challenges are very real. It affects relationships and diminishes hopes and dreams. I hear heartbreaking stories every day on my radio show. Sometimes the problem is not enough money. But more often, the real problem is behavior. If employers want to make a lasting impact on their teams, they need a financial wellness plan that addresses behavior. SmartDollar – our financial wellness program – does that by giving each participant action steps  to build a strong financial foundation, no matter where they are today. If they follow the plan, get on a written budget and take control of their money, they’ll get out of debt, give and invest at an unbelievable rate. Hope can be restored.

Q: When does financial literacy not work and what can an employer do to help their employees?

A: I don’t think it’s effective for a company to simply present its employees with a financial wellness program that tells them to invest. What is effective, proven and measurable is  a holistic approach that includes sound principles of getting rid of debt and puts people in a position to better handle their money and invest in their future.

Q: Additional comments or suggestions regarding how to best implement the right financial wellness program into an organization’s culture—thank you!

A: That’s a great way to ask that question. Implementing a winning program into an organization’s culture is exactly right. If you can get your team to actively take the steps to get on a budget, eliminate debt, save and plan for retirement, they can become more unified as a team and that bodes well for any organization.

Impact of the Different Types of Financial Wellness Program Interactions and the Impact on Users

The Financial Wellness Program has several different ways employees may access the resource–there is the online Financial Planning Center, one-on-one, workshop and webcast.

As the program continues to become institutionalized, we took a look at the impact these different types of interactions have over the course of the program from 2009-2012 on several different key metrics. We looked at the FPC, one-on-one, workshop/webcast, one-on-one and workshop/webcast, and FPC, one-on-one and workshop/webcast.

Financial Wellness Chart 1

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