Wellness Benefits Gaining Acceptance and Respect

Retirement BenefitsWellness benefits can reduce employee stress, improve workplace productivity, and drive down healthcare costs.  In many ways, wellness benefits can deliver a boost to a company’s bottom line.  However, quantifying the return on investment of financial wellness benefit programs can be difficult.  It is a challenge to put quantifiable data around how much a wellness benefit program has improved employees’ financial security or individual retirement readiness.  One of the stumbling blocks to measuring ROI centers around each employee’s situation is unique.  Every employee has different goals. Quantifying the success of wellness benefit programs requires intense engagement with employees.  Employers must thoroughly understand their living situations, spending, and savings habits to understand how much they need to save for retirement and get a good picture of a financial wellness benefit program’s effectiveness.  This can be both time-consuming for employers, and might feel intrusive to employees.

Wellness benefits are being offered by more employers, but workers continue to struggle with their own financial health.  Understandably, plan sponsors are concerned with the financial payback of benefits that revolve around wellness. MassMutual released a study during 2019, which found that eight in 10 retirement plan sponsors believe their employees have financial difficulties.  The study also uncovered that 67% of  plan sponsors are concerned about their workers’ financial readiness for retirement.  In addition, the study found that plan sponsors are concerned that workers’ retirement plan participation should be higher than it is currently.

Mr. Spencer Williams, President of CEO of retirement savings portability purveyor Retirement Clearinghouse, authored an article that appeared in BenefitsPro, which touts auto portability as one solution to the financial wellness ROI impediment.  According to Mr. Williams, “Auto portability — the routine, standardized and automated movement of a retirement plan participant’s 401(k) savings from their former employer’s plan to an active account in their current employer’s plan — can significantly streamline the process of completing a roll-in transaction for employees as soon as they join a new employer.”

The solution uses algorithms designed to track and identify participants with more than one 401(k) plan account.  The obvious benefit is plan sponsors do not need to spend money or engage participants as they would via traditional financial wellness programs.  The auto portability roll-in process happens automatically, but it also gives participants the ability to opt-out.

Mr. Williams opined that seamless plan-to-plan auto portability is a wellness benefit solution.  He cites data from the Employee Benefit Research Institute (EBRI) which estimates that 14.8 million participants change jobs every year.  In addition, Mr. Williams references nearly a third (31%) of 401(k) participants compromise their financial wellness by cashing out their retirement savings within a year of switching to a new employer.

Auto portability for small balances or assisted roll-ins for larger balances has been shown to decrease cash-outs from retirement plans, thus improving financial wellness, Mr. Williams noted.  And it appears to be something participants desire.  He cited a proprietary study from 2018 conducted by Retirement Clearinghouse, which found that 60% of participants would prefer an automated process that enabled them to consolidate their 401(k) accounts and update their addresses in their current employer’s plan.

The Employee Benefit Research Institute (EBRI) estimates that auto portability would help to preserve up to $2 trillion (in today’s dollars) in the nation’s retirement system, which would clearly improve financial wellness and eliminate retirement plan leakage due to cash-outs across the board.  The ROI is also measurable, because once implemented, auto portability enables plan sponsors to demonstrate an average increase in average retirement plan account balances, as well as a reduction in cash-outs.

Wellness benefits seem to be gaining attention as the ROI on these programs starts to be visible and measurable.


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