by Kristie Howard, Longfellow Benefits
With the adoption of worksite wellness growing as a key business strategy to improve workers’ health and productivity, leading employers are already seeing bottom-line benefits from investing to keep employees healthy. As bad news continues to mount on the economic frontand people become more stressed about their personal finances, employers must do more now than ever to help keep employees financially healthy.
While “financial health” has received very little attention from wellness programs to date, this is beginning to change. Financial health—or lack of it—can impact employee productivity as much as physical health. Employees who are struggling to pay their bills or anxious about their finances won’t be as focused on their work.
The key to better financial health is education. Most people know little about managing credit, budgeting, investing, and insurance. As the current crisis shows, many—maybe most—people spend and borrow too much and save too little. That has to end.
Consider the following statistics about employees’ personal financial habits:
- Nearly 25% of workers do not participate in their employers’ 401(k) plans. Of those who do, 30% don’t contribute enough to take advantage of their employers’ full match.
- About 1 in 5 workers who are permitted to do so borrow against their 401(k) plan balances.
- A recent survey found that people spend more time planning their vacations than they spend planning their retirements.
- Surveys of recently retired workers found that as many as 90% continued to work at least part-time. The majority of individuals do so because they need the money.
- One in five mortgage holders has a home worth less than the mortgage on it.
- 30 million American workers—1 in 4—report that they are in serious financial distress and dissatisfied with their personal finances.
- 50% of all workers spend 21 hours per month at work dealing with personal finance issues.
Research has also shown that health and personal finances are correlated. A large proportion of those who are financially distressed, 40% to 50%, report that their health is negatively impacted by their financial worries and problems, according to Dr. Thomas Garman, president of the Personal Finance Employee Education Foundation (PFEEF). PFEEF estimates the annual cost to an employer for ignoring one worker’s financial illiteracy ranges from $750 to $2,000.
More and more employers are taking a strong, proactive approach to help employees better manage their personal finances. In an online survey conducted last year by the Society for Human Resource Management, a random sample of 329 HR professionals was asked whether their companies offered various types of financial management training or services to employees. At the top of the list were one-on-one financial planning sessions, offered by 44% of employers, and debt management, offered by 45% of employers.
Legislation, such as the Pension Protection Act of 2006, has also created a greater awareness of the importance of communicating with employees and providing them with guidance and information. When employees adequately save for retirement because of proper financial education, it helps employers reduce their fiduciary responsibilities as plan sponsors.
So where can employers find experts to provide personal financial planning education and information to employees? You may already have the resources you need.
- Check with your employee assistance program (EAP) provider to see what kinds of financial education seminars, online tools, or telephonic support are available. Many EAPs offer telephonic financial and credit counseling to employees and their family members, as well as referrals and/or discounts for face-to-face sessions with Certified Financial Planners (CFPs).
- Most 401(k) providers offer financial seminars focusing on investments, and some will also cover personal-finance topics such as budgeting and credit management.
- Your health plan insurer may offer healthcare cost calculator tools, as well as resources on navigating Medicare and Social Security.
- Ask your employee benefits brokerage/consulting firm if it has CFPs on staff who can help with employee financial education.
- Consider contracting with a third-party vendor specializing in financial education, such as a credit counseling service or financial planning/education firm.
Be sure to do the appropriate background research on any potential vendor. Financial advisors should have all the necessary education, licenses, and certifications. To avoid potential legal trouble, it is a good idea to explain clearly that the employer is not providing its employees with any financial planning advice or recommendations and that employees are free to use whatever resources they want.
By making an investment in employees’ personal financial health, employers not only provide an invaluable benefit that can improve the lives of employees, but also the tangible bottom-line results of the company.
Kristie Z. Howard, CEBS, CWPM, is senior consultant, Employee Benefits, with Longfellow Benefits (www.longfellowbenefits.com), a Boston-based employee benefits consultant and broker. She can be reached at khoward@longfellowbenefits.com.