Financial Wellness needs to be top of mind for employers wanting to improve outcomes for their employees.
401(k) plan participants are stressed about money, and they want employers to help them get their financial wellness on track. It’s no wonder: Inflationary conditions persist, and most economists agree that a recession looms on the horizon within the next 12 months.
A recent TIAA study, cited in BenefitsPro, found that less than half of U.S. workers have enough savings to cover six months of living expenses, and roughly 60% report being stressed about their finances. Additionally, more than half of respondents to the TIAA study said they believe their employers are responsible for helping them maintain financial stability in the aftermath of the Covid-19 pandemic.
A separate study from Franklin Templeton, also cited in the same BenefitsPro article, had similar findings, revealing that three out of four workers would like their workplace to provide more resources to help them with retirement savings and overall financial wellbeing.
Employers feel pressure, too. They need resources and solutions to be able to provide workers with the financial support they’re asking for. Public policy plays a role; government is responsible for setting the parameters that help provide access to safe and secure retirement savings opportunities for Americans.
SECURE Act 1.0, passed in 2019, accomplishes some of these goals, providing access to guaranteed lifetime income options in retirement plans while alleviating some of the fiduciary burden on plan sponsors through Safe Harbor provisions. However, a few years in, relatively few 401(k) plans offer in-plan lifetime annuities, even though plan sponsors agree they are needed. Additional advisor and plan sponsor education, comparative data, and due diligence tools and monitoring would likely all help to increase uptake of lifetime income products in 401(k) plans.
SECURE 2.0, which has the potential to pass before year-end, may require more small businesses to offer retirement plans. If that occurs, ensuring recordkeeping platforms are able to connect with payroll providers is another challenge the industry will need to address.
As employees continue to look to employers for assistance in improving financial wellness, companies should look at their benefits packages and take a more holistic approach to help workers save for today as well as for the future. Financial wellness programs can help employees more adeptly manage their day-to-day finances, pay off student debt, and create emergency savings. Employers can help workers leverage a financial wellness benefit by delivering educational materials and sessions, as well as more targeted advice, via in-person and digital platforms.
Plan sponsors should also consider leaning on their advisors’ expertise when it comes to building financial wellness offerings. Delivering benefits that help employees feel more financially secure will benefit employers because it translates to a workforce that is more productive. It also leads to better retirement readiness and plan outcomes, and that’s a win for everyone.
