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The Evolution of Financial Wellness Programs: New Benefits to Consider for 2018

Topics: Retention

The topic of financial wellness is starting to get more and more attention in the HR community.

Multiple studies came out in 2017 showing that many employees aren’t in a good emotional state about their finances. PwC’s 2017 Employee Financial Wellness Survey of 1,600 full-time employed adults found that 53 percent of employees are stressed out about their finances.

Willis Towers Watson’s Global Benefits Attitudes Survey found that barely one-third of U.S. workers (35 percent) were satisfied with their financial situation in 2017, a sharp decline from 48 percent just two years ago. Additionally, more than a third of U.S. workers (34 percent) now believe their current financial concerns are negatively affecting their lives, compared with just 21 percent two years ago.

Multiple factors are compounding employees’ financial distress. A recent survey found that half of all workers got no raise within the past 12 months. Real wages (adjusted for inflation) in 2017 stagnated (per The PayScale Index). Healthcare premiums are on the rise and costs are increasingly falling on the employee rather than the employer. Lastly but not least, millennials are overburdened by student loans and face the “scariest financial future of any generation since the Great Depression.”

Employees who are stressed about money are more likely to be more distracted at work, miss work due to personal financial issues and cite health issues caused by financial stress. To help employees lighten the load — and to boost employees’ productivity and their own reputation as a desirable place to work — more companies are starting to offer financial wellness programs.

In this article, I’ll highlight six newer financial wellness benefits that employers are now offering or might start to offer in 2018. I’ll also share some tips you’ll want to consider before you implement any new programs.

1. Health Reimbursement Arrangements

As health premiums continue to rise, employees are on the hook for more of the costs. Health reimbursements are employer-funded, tax-advantaged employer health plans that reimburse employees for out-of-pocket expenses. They can be used by the employee to pay for a portion of their healthcare premiums, as well as qualified medical expenses such as lab fees, eye exams or prescriptions.

Last year, Congress passed a new law allowing smaller employers to use health reimbursement arrangements to pay for non-group plan health insurance premiums, including plans purchased on healthcare exchanges under the Affordable Care Act.

Arthur Tacchino, principal and chief innovation officer at healthcare compliance SyncStream Solutions predicts that this benefit will be offered in 2018, because “with [health reimbursement arrangements], individuals can use the funds [to pay] for premiums, that’s another incentive for employers to move that way.”

2. Student Loans Aid

Data from the College Board shows that millennials have taken on 300 percent more student debt than their parents. The average student from the class of 2016 graduated with $37,712 in student loans.

A survey released by IonTuition, a provider of web-based student loan management tools, found that many student loan borrowers in the U.S. would prefer to work for an employer that offers student loan management help as part of their benefits package. Companies who provide this benefit will have an advantage over their competitors in attracting and retaining these workers.

A small but growing number of employers now offer student loan assistance. According to a 2016 survey by the Society for Human Resource Management, 4 percent of SHRM members offer this perk.

Companies like Aetna, Fidelity and Penguin Random House have all started offering a contribution toward employees student loans. Others don’t contribute to loan payments but provide access to third parties who may offer a lower interest rate on a refinanced loan.

A bill introduced in Congress last January, the Student Loan Repayment Assistance Act of 2017, would give employers a tax credit for providing student loan payment assistance for employees, similar to how medical care is tax-deductible for the employer, and provide a greater incentive for employers to help with student loans.

3. Automatic 401K Plan Enrollment and Auto Escalation, with Employer Match

Providing a 401K Plan — with the employer matching a portion of employee’s own contribution — has become a mainstream practice. However, the practice of automatically enrolling all employees into the company 401K is just starting to pick up traction. Additionally, some 401K plans include automatic escalation — where employee’s deferral percentage (savings rate) is increased incrementally by 1, 2 or 3 percent annually as people grow closer to retirement.

My company, PayScale, provides this benefit for all its full-time employees. To learn why more companies are offering this benefit, I reached out to Rob Raphael, Principal at TRUEretirement, the independent 401K plan advisor to PayScale, to get his thoughts.

The hardest thing to overcome is inertia when it comes to saving and those employees that opt not to enroll early in their 401K plan often regret it much later on in their career. This leads to employees having to ‘make up’ the time they should have been saving and [take] on too much risk in their investment portfolios, which sets them up for greater losses when we have stock market corrections.

Companies that take a proactive approach to helping their employees save and prepare for retirement are on the leading edge of helping create successful outcomes for their employees. Further, anecdotally, we have heard that employees, absent the financial stress of knowing if they are on track for retirement, are happier and more productive.

This benefit isn’t without potential drawbacks. According to Raphael, the biggest one is that it doesn’t accommodate all financial situations, such as when employees are strapped financially and can’t afford to contribute to the 401K or increase their contributions year over year.

“That’s why we encourage companies that are considering auto enroll and auto escalate provisions within their plans to also include an opt-out feature that allows employees to decline participating in the 401K and/or the automatic escalation of their savings rate,” says Raphael.

4. Employer-sponsored savings account

At this point, many workers’ top priority is financial stability for their families, not economic mobility. Employer-sponsored savings accounts — kind of like an emergency-fund 401K that lets employees automatically divert a portion of their paychecks into a fund — is something a few have started to explore.

SunTrust Banks is taking the lead on this front. As a perk, they are providing a day off to their employees to put their financial lives in order. On top of that, the banking institution offers up to $1,000 to each employee to seed an emergency savings account. Bill Rogers, the bank’s chief executive, introduced this benefit after he saw that even his own workers — who he had assumed were more knowledgeable about money and in better financial shape than most people — were making poor financial choices, like borrowing against their 401K plans.

5. Third-Party Financial Planning Services and Online Tools

Some companies are taking additional steps to help employees gain control over their finances by partnering with companies who specialize in this area. Companies like LearnVest and HelloWallet offer services that help employees better manage and save their money. These types of programs help employees address their specific financial concerns, such as saving to buy a home or send children to college.

6. Personalized Financial Counseling

Personalized financial counseling is growing faster than online solutions, according to Optimizing Financial Wellness for a Diverse Workforce, the latest study from Financial Finesse, a provider of financial-wellness programs. This benefit works well in larger and highly diverse organizations, because counselors can readily adapt their advice to different types of employees.

Things to Watch Out For Before Implementing a New Program

Be aware of employees’ privacy preferences.

Money is often a taboo topic. A major concern about these programs is privacy, as many employees may not want “the man all mixed up in their business.” You’ll want to think through what your employees will consider helpful versus invasive.

Be mindful of who is in your workforce.

Your employees have different financial needs and behaviors. Some workers — typically younger ones — may need help with managing day-to-day finances (i.e. create an emergency fund) while others are more concerned about wealth accumulation. As a first step, seek to understand the cycle of financial wellness across different segments (generations and life stages, for example) within your workforce — so you can figure out which benefits would be most meaningful.

Get your house in order when it comes to base pay.

If your employees think that they aren’t paid adequately or fairly, they won’t be giving 100 percent in their jobs. Before you implement any new financial wellness benefit, figure out if it’s actually your compensation plan that needs immediate attention.

If you don’t have a compensation plan in place with an articulated compensation philosophy that lets employees know how their pay is determined, employees will doubt your sincerity when you announce a new financial wellness program.

Want more tips on how to build a financial wellness program? Check out this guide from Namely.

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