The New Finance Of Longevity

Fixing Financial Un-Wellness at the Workplace

As business booms, many employees struggle with savings, debt and the healthcare wild-card

by Ken Verzella

Mr. Verzella is Head of Financial Wellness for Workplace Solutions at Massachusetts Mutual Life Insurance Company (MassMutual®). Visit www.massmutual.com

Tight competition for talent … on- and off-again trade wars … shifting consumer preferences.  Despite a relatively robust economy, businesses have no shortage of external forces to worry about.

However, those concerns now have also moved internally.  One of the bigger challenges that many organizations now face can be found within the confines of their own workforce. The problem is that 79% of employers say their workers are struggling financially as they wrestle with saving for retirement, paying down debt and dealing with medical expenses, according to the 2019 MassMutual Workplace Financial Wellness Study1.

Financial advisors who support retirement plans are well-positioned to help employers solve this pressing problem and, in the process, reach more people who need financial assistance. But it’s essential to understand the problem at its roots before jumping in to help with more comprehensive financial solutions. The problems experienced by employees can vary from employer to employer.

Keeping An Ear To The Ground…

So how exactly do employers know their employees are struggling? What is the proof? Often, the intelligence comes from managers’ conversations with employees.  Anecdotally, it’s learning that an employee is persistently showing up late to work because of an unreliable car, seeing employees come to work ill because they can’t afford routine medical treatment, or employees distracted at work because they can’t find affordable day care.

Employers are reporting other signs of financial stress such as the lack of participation or failing to save enough in retirement plans, working second jobs, taking loans from retirement plans to cover emergency expenses, asking for paycheck advances and other behavioral indicators. It’s a smorgasbord of money woes.

The causes of financial stressors also vary but some are more prevalent than others. The financial hurdle that trips up more workers than others is credit card or other consumer debt, the study finds. Other issues include day-to-day expenses for housing and childcare, a lack of emergency savings, and high medical costs. Tuition loan debt is also prominent on the list.

Employers are noticing, not only their employees’ day-to-day struggles but the longer-term issues that shorter-term financial problems either create or exacerbate. The specific financial issues plaguing employees seems to differ with the size of the employer. Larger employers are more likely to point to employees failing to participate in their employer-sponsored retirement plan or, if they do participate, withdrawing funds from their plan, the study finds.

A majority of employers (57%) say their workers are seeking help from them with their personal financial problems, according to the study. Another 17% of employers say they are unsure if employees want help through work. The larger the employer, the more likely the company is to indicate that employees are seeking help, the study finds.

The growing volume of calls for financial assistance through the workplace is an opportunity for financial advisors who support workplace retirement savings plans such as 401(k)s to connect with and help more people. Advisors can often tap into resources offered by retirement plan providers. But where to start?  How can advisors help employers develop effective financial wellness programs at the workplace?

It starts with a simple three-step process: assessing employees’ needs, creating multiple connection points, and checking and adjusting to reach established goals. Advisors who support retirement plans can help pour the foundation for successful financial wellness programs by following a needs-based, goal-oriented approach.

Step 1: Assessing Needs

To achieve success, a program designed to help employees needs to be accessed and used by employees.

In retirement plan parlance, that takes engaging employees and monitoring behaviors for change.  A traditional starting point is to analyze the employer’s retirement plan data. Learning more about plan participation, savings rates, retirement readiness and other benchmarks will help paint a picture of employees’ overall ability for a secure retirement.  A more modernized examination for the employer is to help quantify the retirement readiness in connection with the potential unfunded liability associated with the cost of an underprepared worker.

However, financial wellness goes beyond a retirement-only lens as there are other important short- and long-term financial priorities.  In order to begin this assessment, evaluate what employees receive as part of their employer’s current benefits plan. Are employees making use of existing benefits? Does the current program help handle short term emergency or medical expenses? Is there a debt relief valve available in the form of consumer debt counseling, student loan repayment or refinancing program or both? From here, can you gain a perspective of what coverage employees utilize today, what is their ideal coverage across different benefits and — just as important – what can they actually afford?

financial wellness goes beyond a retirement-only lens as there are other important short- and long-term financial priorities.  In order to begin this assessment, evaluate what employees receive as part of their employer’s current benefits plan...

This evaluation should help pinpoint potential shortcomings and identify opportunities to introduce new solutions and education programs.

Step 2: Building Connection Points

Advisors know from experience that clients of a similar age or life stage can have vastly different needs depending upon their life experiences. It’s also true at the workplace where each employee must be treated as an individual in order to address their specific financial needs and journey towards financial wellness.

That means it takes multiple connection points in order to engage employees in a financial wellness program as well as a wide range of education, tools and solutions. There is no shortage of stories about Millennials who are viewing early retirement as a primary goal while baby boomers plan to work forever and a day. Of course, not every goal is realistic, which is why education is so important. Offering multiple access points to a financial wellness program may increase opportunities to participate and, ultimately, encourage healthy financial behaviors.

The best programs allow for a multi-channel approach that connects with employees at their specific life stage, communicates with them in their medium of choice (online, on the phone, on a mobile device or on site), and offers information in a digestible way. For example, it may be helpful to break down specific milestones for retirement planning into actionable steps over time to encourage employees to start saving and keep at it.

Providers can help as well by providing tools to help employees evaluate their relative financial wellbeing and make the right financial choices. The best tools take into account each employee’s individual financial situation and budget, helping establish priorities to put each worker on the right path to financial wellness. Employees need a financial game plan, not just for today, but for the future as their needs adjust over time.

Step 3: Checking and Adjusting

But will the financial wellness plan work and how well? In today’s data-driven business environment, it’s essential to measure and demonstrate progress towards greater financial wellness for employees over time. Advisors need to discuss with employers what success looks like and establish metrics and benchmarks accordingly.

Does the employer want to boost participation and savings within the company’s retirement plan? How about improving the number or percentage of employees who are on track to retire? Cutting down on the number of withdrawals and loans from the plan could be another measure of success. And, of course, surveying employees about their overall feelings of financial security and tracking the results over time is another solid indicator.

Creating success stories can help motivate other employees to improve the health of their own finances. Encouraging employees who make use of the financial wellness benefits and tools to share their successes and express their ideas and opinions can be contagious. Their feedback may provide valuable input to improve the plan. It also can provide a powerful motivator for other employees to take greater advantage of what an employer has to offer.

Recognizing Financial Issues

The path towards greater financial wellness at the workplace cannot be blazed without employers first understanding that their employees have a problem and need help. MassMutual’s study paints a stark picture and connects the dots to the underlying causes of financial unwellness. It’s up to every employer to decide whether the company has an issue and if it’s worth pursuing to do something about it.

For many, it’s a worthy challenge, one that can pay dividends in both financial and human terms. Helping employees start to overcome their shorter-term financial challenges – reducing consumer debt, paying down student loans, accumulating savings for financial emergencies and other issues – clears the air to better view longer-term financial needs. Reducing financial worries may also help employees focus better while at work, a boost to productivity.

Providing greater financial security for employees in the shorter term can ultimately help them focus on their long-term needs like retirement savings. Employers are then free to focus on the next business challenge.