Financial Wellness - Giving Credit Where It's Due

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Corporate wellness programs have been designed to foster employee wellness in businesses across the board, ranging from manufacturing plants to academic institutions and across both large and small corporations. Since their inception, however, corporate wellness programs have focused on reducing healthcare expenses, with little attention dedicated to emerging priorities, such as boosting employee loyalty, in-house productivity and most recently, financial wellness.

It's time to shift that focus to a more holistic and balanced view of today's employee concerns. And while there is an unprecedented amount of fear and attention placed on the rising cost of healthcare, there is a much greater issue at hand. For example, an unexpected medical event in January or February when the Health Savings Account is not yet funded, or an expensive car repair that could jeopardize a family's ability to pay for ordinary expenses.

It's time for the corporate wellness conversation to make a pivot and focus on the financial wellness of working America. This shift has to be fully integrated into corporate benefit programs because it relates to resource allocation - how much goes to pay for health insurance, death and disability insurance, and managing the delicate balance between covering healthcare, saving for retirement by making contributions to a 401K, and debt management. Employees are struggling to do the right thing and need help in understanding how best to allocate their earnings. Financial Wellness can no longer be a sidebar conversation or stop at the education stage, it needs to be top of mind and offer real solutions for today's worries.

A robust financial wellness program should include budgeting, protection, debt management and access to credit. Yes, access to good and responsible credit. You can't have a comprehensive financial wellness program without this - and let me explain why. If the goal of the financial wellness program is to support employees, relieve today's stress and build for a better future - then reliable access to good credit is a critical ingredient.

The 2015 MassMutual Employee Benefits Security Study found that 37 percent of workers find managing their personal finances "somewhat" or "very difficult" and 40 percent say personal financial problems are a distraction at work.1

Fueling some of that distress is a lack of savings, as 29 percent of Americans have no emergency savings and 21 percent don't have enough to cover three months' expenses, according to the Bankrate.com 2016 Financial Security Index.2

According to a 2014 report, "Borrowing from the Future: 401() Plan Loans and Loan Defaults3," by the Pension Research Council (PRC) at the Wharton School, University of Pennsylvania, one in 10 loans from 401(k) plans is defaulted, typically by employees who have tight financial circumstances and who need to address financial emergencies. The authors of this report believe that this results in a $6 billion dollar annual "leakage" from retirement savings.

According to a new report 4 from the International Foundation of Employee Benefit Plans (IFEBP), 406 organizations in the U.S. and Canada revealed that their workers are struggling and stressed over:

  • Debt (66 percent of respondents)
  • Saving for retirement (60 percent)
  • Saving or paying for children's education (51 percent)
  • Covering basic living expenses (48 percent)
  • Paying for medical expenses (36 percent)

This financial stress is affecting employees' abilities to focus on work, leading to increased absenteeism, reduced morale, and is having a negative impact on their physical health.

Financial wellness programs that solely include topics like budgeting, protection, and 401Ks simply don't resonate with employees who are living paycheck to paycheck. Certainly, you have employees who want to learn about how to better manage their finances but every organization has a significant number of employees that are living in debt- and it doesn't have much to do with income. It is time for employers to use their "buying power" and to sponsor a financial wellness program that provides employees with reliable access to good credit. It is time for employers to deliver financial certainty to a broad base of employees and add to the benefit package access to credit that goes beyond credit scores.

Partnering with a socially responsible lender who specializes in credit to employees can extend credit at affordable interest rates to all employees based on employment data and benefit eligibility. Employees who take advantage of this kind of a program, where they take and pay off loans through payroll deductions, not only have the opportunity to get the credit they so desperately need, but they have a unique opportunity to build their credit scores. A credit program that accounts for employment data in its underwriting provides a real answer to financial stress at the workplace.

A few final thoughts. Have your financial wellness program deliver Financial Certainty. Incorporate reliable access to credit as the cornerstone that ensures your financial wellness program truly resonates with employees and appeals to all ranks. Employees gain security with the knowledge that if needed, they can resolve short term gaps in their finances and/or pay for a life event, and with less financial stress they will likely be able to focus and engage more actively in their work communities.

12015 MassMutual Employee Benefits Security Study, https://www.massmutual.com/~/media/files/MM-EE-Benefits-Security-Study-Report.pdf2Bankrate 2016 Financial Security Index, http://www.bankrate.com/finance/consumer-index/americans-still-lack-savings-despite-wage-growth.aspx3Borrowing from the Future: 401(k) Plan Loans and Loan Defaults, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2517447 4Financial Education for Today's Workforce: 2016 Survey Results, https://www.ifebp.org/bookstore/financial-education-2016-survey-results/Pages/financial-education-for-todays-workplace-2016-survey-results.aspx

About the Author

Einat Steklov

Einat Steklov is co-founder of Kashable, a leading company that provides socially responsible financing solutions for employees, offered as an employer-sponsored voluntary benefit program. Contact Einat at einat@kashable.com