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Workplace Debt Management Programs: Has Financial Wellness Gone Too Far?

Workplace Debt Management Programs: Has Financial Wellness Gone Too Far? Growing numbers of employers have begun helping employees to manage their personal debt as a path to improve their retirement readiness. While on its face, this approach is logical, even commendable, I wonder if there isn’t a deeper ulterior motive behind employers’ seemingly altruistic efforts to help employees deal with their personal debt (more on this later in the article).

For context, here’s what’s happening, according to this article from InvestmentNews: Employers like the Durham (N.C.) Public School system has implemented financial wellness programs focused on debt management in the hope of helping employees make room on their household balance sheets to set money aside for retirement. DPS provided employees with access to online articles, videos, and blogs, and brought in representatives from the state’s employee credit union to conduct a debt management workshop, which addressed all kinds of debt, from credit cards to mortgages. The result was an increase in employee savings rates, along with a less stressed workforce. DPS also saw improved recruitment and retention due to the program.

Personal debt is a monster issue in America, in case you didn’t know. Due to our “keeping up with the Joneses” and “instant gratification” tendencies, the majority of Americans rely on the “buy now, pay later” convenience of credit cards and other financing arrangements. What’s more, most of us don’t understand that the “low monthly payment” includes mostly interest with a tiny bit of principal in the best case scenario, and what costs $1,000 in real dollars today, actually costs multiple times that when we get done paying off all that interest several years later (if at all). Most of our lives are leveraged, rented, and borrowed, leaving us stressed, hopeless, and broke. Not a pretty picture, is it?

As such, citing the Employee Benefit Research Institute (EBRI) triennial debt report, the InvestmentNews article points out, “‘American families just reaching retirement or those newly retired are more likely to have debt — and higher levels of debt — than past generations, specifically those in the 1990s.’” A separate survey by the Society of Actuaries found that, among active workers 45-80 years of age, 55% reported having mortgage debt, while 46% had credit card debt. I don’t normally view mortgage debt as “bad debt,” per se, but maybe all debt is bad debt when you’re headed into or already in retirement.

According to a senior consultant at Willis Towers Watson cited in the InvestmentNews article, employers are making it easier for employees to understand and digest available educational resources for financial wellness and personal debt management. Interactive decision support tools would be the next step, followed by access to independent financial counseling and credit providers, the consultant said. Of course, that presents a governance challenge for employers, because how do you monitor that?

In addition, workplace debt management programs are still relatively new, and employers may still be getting comfortable with the idea. According to research from Alight Solutions, again cited by InvestmentNews, just 23% of the 187 employers surveyed said they believed they should provide debt management assistance for employees, compared to 46% of employees who believe employers should help them with their personal debt management issues. This is often the way these surveys go: employees expect help from their employers, and yet, some employers are somewhat reluctant to provide that help.

While some employers are concerned about being too paternalistic by instituting simple fixes like auto enrollment and auto escalation, others are taking it upon themselves to help employees with debt management through financial wellness programs.

No one was concerned about pension plans being too paternalistic. Private entities and increasingly public institutions have dropped their defined benefit plans for defined contribution plans leaving employees to mostly fend for themselves. Perhaps the growing interest in financial wellness programs is a recognition that people need help.

And whether employers are being altruistic or they understand the benefits of less stressed employees who are better prepared to retire on time, the pendulum is swinging back to the “paternalistic” days of pension plans in the form of matches, auto-plan features, and financial wellness programs – without the explicit employer liability of course.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek

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