Design of Financial Wellness Programs: What Do Employees Want and Whom Do They Trust?

The attached article by DCIIA is a great insight on the impact the pandemic had on retirement savings and the financial well being of individuals.  Financial Wellness programs have always been a consideration of employers sponsoring a 401(k) plan, but the value added compared to the investment in time and resources has created a barrier for plan sponsors.  However, based on the following statistics outlined in the article, compiled before the current market volatility, it is more important than ever for plan sponsors to consider implementing a financial wellness program.

Research was conducted March 12-15, 2021.

• Almost half (46%) of Americans have been negatively impacted financially by the COVID-19 pandemic – most notably, younger consumers age 18-34 (57%), those with lower HHI (<$50K, 57%), and women (50%).
• 38% of Americans report an impact to their household employment status (e.g., reduced hours, lost job/laid off, salary reduction, furloughed) as a result of COVID-19.
• Almost 1-in-10 have chosen to leave their job due to external responsibilities (e.g., caregiving, homeschooling, etc.) – highest among those working in Healthcare (19%), Caregivers (14%), and consumers ages 18-49 (11%).
• Reliance on savings is the leading source for covering expenses due to COVID-19. Reliance on retirement accounts (e.g., loan/withdrawal, COVID-related distribution) have also decreased across the board. That said, 16% have taken some type of loan/withdrawal as a result of COVID-19. [Note: Retirement accounts include employer-sponsored retirement account and/or another retirement plan.]
• Two-thirds (65%) of those who took a loan/withdrawal believe they are now behind in saving for retirement.
• Only 40% plan to retire at the same time they did prior to COVID-19, while another 40% are unsure. Those who are uncertain about their retirement date are more likely to be from lower income households (<$50K, 52%) and not currently working (59%).

Historically, plans have been designed to encourage employees to participate by offering matching contributions and automatic enrollment.  However, even with positive outcomes from the utilization of those plan features, participants are still not on track to reach their retirement income goals.  The reason is because their personal finances do not allow them to contribute enough to the plan to reach their retirement income goal and in many cases not contribute enough to maximize the employer matching contribution.  Statistics over the years have proven financial wellness programs not only benefit the employees the employer also receives financial benefit by reduced turnover, less utilization of the healthcare plan, and increased productivity.

In conclusion, a properly designed 401(k) coupled with a comprehensive financial wellness program can create a win-win for both the employee and the employer.