Special Report for Employers
Employee Financial and Personal Economic Wellness
Financial stress can lead to distress, sleep deprivation, absenteeism, reduced productivity, employee turnover, mental illness, etc.^3
Financial stress causes more than 11 lost days of productivity per year^4 (per employee).
20 to 30 percent of those with high levels of stress from debt live with anxiety or depression.^5
The ROI for employers who offer employees easy access to financial programs is at least 3:1 and that doesn’t include the value of the increased goodwill.^6
50% spend 3 or more hours at work each week thinking about or dealing with financial issues^7.
31% say productivity at work has been impacted by financial worries.^7 Health has been impacted negatively by financial worries. 26% millennials, 32% Gen X and 25% boomers have indicated a negative impact.^9
3 Aversa, J. Associated Press (2008) Stressed over debt taking a toll on health 4 The Conference Board of Canada, Money on the Mind Presentation, February 21, 2018
5 The 2016 Financial Stress Research (Financial Finesses)
6 Prawitz, A.D., Garmin E.T. (2009) www.pfeef.com
7 PWC 2017 Employee Financial Wellness Survey
8 Manulife Financial/IPSOS Reid, Health and Wellness Study 2014
9 PWC 2017 Employee Financial Wellness Survey
Employer ROI on Personal Economic Wellness Programs for Employees
Employers who help employees improve their overall financial wellness and reduce financial stress can reduce costs in a number of areas that positively impact the company bottom line, as well as improve employees’ retirement prospects, a study from Financial Finesse finds.
The study found that employees who suffer from overwhelming financial stress or struggle to maintain financial stability tend to incur both immediate and future financial costs for their employer in the form of absenteeism, garnishments, payroll taxes, and delayed retirement. As employee financial health improves these costs diminish.
For its 2016 ROI Special Report, Financial Finesse conducted a case study of Fortune 100 company’s comprehensive workplace financial wellness program from 2009 to 2014. Depending on employer size, employers can save up to $433,007 in garnishments, up to $682,034 in flex spending/health savings, and up to $4,347,275 in absenteeism by improving the workforce’s financial wellness score from 4 to 5 on a 10-point scale. The savings is even greater when improving the workforce’s financial wellness score from 4 to 6.
As part of the study, Financial Finesse separated participants into one of five levels of financial health based on their financial wellness score: suffering, struggling, stabilizing, sustaining, and secure.
Thirteen percent of respondents are “suffering” employees. They averaged 17 hours of absenteeism a year, 10.7% had wage garnishments and 49% reported having taken a retirement plan loan or hardship distribution. They are also the least likely to contribute to their retirement plan (80%), have the lowest average retirement plan deferral rate (5.04%) and contribute the least on average to flexible spending and health savings accounts.
Financial Finesses suggests suffering employees tend to feel overwhelmed by their circumstances and may lack the necessary guidance and motivation to help them out of their situation. For this reason one-on-one guidance and coaching on cash and debt management from financial professionals via phone-based or in-person sessions is the best way to stop the financial bleeding and to start on the road to financial recovery. Additionally, employers should require employees to participate in mandatory financial counseling when wages are garnished, or when employees request a retirement plan loan or hardship withdrawal. Employees that receive financial counseling at the time of requesting a loan or hardship withdrawal are 35% to 50% less likely to request a subsequent loan or hardship withdrawal compared to the average rate of recidivism.
Contributions to flexible spending and health savings accounts were a bit higher for “struggling” employees than those made by suffering employees, and average retirement plan deferral rates increased to 6.18%. Despite having substantially higher cash and debt management financial wellness scores relative to their suffering counterparts, struggling employees exhibit a severe lack of confidence in retirement and investment planning. Only 18% reported feeling confident in their investment strategy, and 5% indicated being on track for retirement.
“Stabilizing” employees have cash flow and debt under control, but they generally lack progress toward longer term financial goals like paying for college and retirement. Financial Finesse suggests employers should offer financial education that incorporates company benefits about these topics. Since stabilizing employees may not be able to take time off to participate in these educational sessions, employers should offer them during lunch periods, online, or via one-on-one coaching either on the telephone or in person.Benefits planning should be offered prior to open enrollment to improve benefits participation, and general financial planning should be offered throughout the year to assure budget, credit and risk issues are being addressed.
As employees become more financially healthy, it will be important for them to develop wealth protection strategies that preserve assets and manage risks, Financial Finesse says. This can be done through advanced financial planning and education that addresses wealth-protection strategies through insurance, tax, and estate planning. This can raise awareness of voluntary benefits such as prepaid legal and portable insurance and help position the plan sponsor as an employer of choice.
DATA ~The 2016 ROI special report - a study from Financial Finesse
When the DOL enacted ERISA, (Employee Retirement Income Security Act) in 1974 the language regarding employer's responsibility to provide Financial Literacy Education for their employees was rather vague. However, in 2008 the Supreme Court handed down a decision in the LaRue vs DeWolff case that clearly puts the onus on employers to provide Financial Literacy Education to their employees.
In that case, the employer, DeWolff, was held liable to reimburse an employee, LaRue, $150,000 that he had lost from his 401(K). Not because the plan lost money for the employee, but because the employee was not properly educated about the plan and who did and who did not have authority to make changes in the plan.
Back to ERISA - Within the ERISA statement employers are held responsible to "provide education to the employees about the plan and related issues outside of the enrollment period", and "by an unbiased third party". In other words, not by the representative of the retirement plan or a seller of retirement plans.
A well designed Financial Literacy Education program should not only provide education about the specific retirement plan offered by the employer, but should also educate about finance strategies that can add to the economic well-being of the employees.
Typical Financial Literacy Programs provide information about how retirement plans work in general, and who has authority to make changes to the plan in behalf of participants. In addition, many programs include education on creating personal budget plans.
What sets HFFTA's Financial Literacy Education apart is that in addition to the basics mentioned above, we include education on specific strategies that can help to alleviate the financial stresses that over half the workforce are suffering from.
We teach Cash Flow Management strategies - beyond basic budgeting - that can help employees increase their positive cash flow with their current income; Pay down debt faster without paying out more than they already are; Increase their credit score; Create a high interest savings while also protecting their families financial future, and more.
Employees will learn that there are strategies and actions they can take now to improve their quality of life and reduce their financial stress. Employers will experience lower absenteeism, greater productivity and company loyalty, as well as improved company culture.
For more information or to schedule a meeting to discuss HFFTA's Employee Personal Economic Wellness Program, email us at HIfinanceAcademy@gmail.com
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