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Financial Wellness: Understanding how a strong financial wellness program benefits employers

Friday, December 15, 2017
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 Authored by Philip Steele, AIF Partner, Cerity Partners

All employees of an organization have financial wellness needs.

When organizations offer a wellness program to their employees designed to improve their overall financial wellness and decrease their overall financial stress level, the benefits are not only experienced positively by the employee but are also strongly reflected on the company’s bottom line. This paper presents statistics from complementary studies that show the startling statistics that employees are experiencing as well as the impact on an employer’s bottom line.

Financial Wellness Numbers Affecting Employers

A strong financial wellness program can very positively impact a company’s bottom line. A recent case study from Financial Finesse1 cited numbers about a company’s comprehensive financial wellness program. Amounts will vary based on company size, but on average in a large employer setting, Financial Finesse found that:

  • Employers can save up to $433,007 in garnishments.
  • Employers can save up to $682,034 in flex spending/health savings.
  • Employers can save up to $4,347,275 in absenteeism.

In addition, employees with lower financial wellness averaged:

  • 17 hours of absenteeism per year,
  • 10.7% had wage garnishments,
  • 49% reported taking a retirement plan loan or hardship distribution.

 These employees are less likely to contribute to their plan, have the lowest deferral rate and average the least contributed to flexible spending and health savings accounts.

Other Surprising Statistics

According to a survey conducted by PWC on Employee Financial Wellness2, many participants haven’t been able to fully recover since 2008 and are continuing to experience financial stress. Some noteworthy statistics that are concerning to employers include:

  • 52 percent of participants indicating that they are stressed about their finances.
  • 45 percent have said that financial stress has increased over the last 12 months.
  • 22 percent are now financially responsible for a parent or in‐law.
  • 28 percent of employees indicated financial distractions at work.
  • 46 percent say they are spending three or more hours daily dealing with financial stress.
  • 45 percent of employees, regardless of early, middle, or late career status cited that financial stress was their number one concern over health, jobs, and personal relationships.

 This added stress leads to lost productivity and increased health issues which increase health care costs and time away from work.

Financial Considerations for the Employer

  • How much does turnover cost the company?
  • A financially healthy workforce has a greater chance of retiring on schedule which will lead to lower payroll, health care, and worker’s compensation costs.
  • Seventy percent of Human Resources professionals surveyed said financial problems impact job performance.
  • Fifty percent of plan participants were certain that they would increase 401(k) contributions if they had less debt. Thirty‐one percent of participants would save more for retirement if they held an emergency savings platform.

How can we remedy the financial crisis for employers?

Remedies to achieve financial wellness success include:

  • Enriching and educating employees with a robust financial wellness program that not only benefits the employee’s financial health, but also the employer’s bottom line.
  • Providing one‐on‐one guidance and financial management coaching from objective financial professionals in a personalized phone or in‐person setting benefits the employer.
  • Providing mandatory financial counseling for employees who request a retirement plan loan or hardship distribution will cause employees to think twice about requesting such a loan.

Participants with strong financial wellness and education correlate to higher participation and contribution percentages into flexible spending and health savings accounts which lead to lower employer FICA‐tax expenses. Also, increased financial wellness awareness and education can lead to increased retirement savings.

Summary

Financial wellness is a topic that is critical not only to employees but also to organizations as a whole. This paper delivers startling numbers when it comes to analyzing employees’ financial health and the effect, both positive and negative, that it has on an organization. By utilizing a strong and robust financial wellness program, an employer can:

  1. Increase employee loyalty.
  2. Reduce financial costs for employees.
  3. Create a competitive advantage when attracting the best applicants.
  4. Develop a sense of inclusion amongst everyone in the organization.

Author: Philip Steele, AIF Partner, psteele@hpmpartners.com 11601 Wilshire Blvd., Suite 2240 Los Angeles, CA 90025

Disclosures:

Cerity Partners LLC (“HPM”) is an SEC registered investment adviser with offices in New York, Illinois, Ohio, Michigan and California. This publication contains general information only, and neither HPM nor its affiliates or subsidiaries is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your company’s retirement plan or its participants, you should consult a qualified professional adviser. HPM and its affiliates and subsidiaries shall not be responsible for any loss whatsoever sustained by any person who relies on this publication. There is no guarantee that the views and opinions expressed in this publication will be effective in your particular circumstances. The information presented is subject to change without notice. All information is deemed reliable but is not guaranteed. For information pertaining to the registration status of HPM, please contact us or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).

1Encinas,Danielle.(2016,September).Financial Finesse Study Offers Predictive Model for Quantifying the ROI of Financial Wellness.https://ffinesse.app.box.com/v/2016‐ROI‐Press‐Release.

2PricewaterhouseCoopers LLP. (2016, April) Employee Financial Wellness Survey.http://www.pwc.com/us/en/private‐company‐ services/publications/assets/pwc‐2016‐employee‐wellness‐survey.pdf.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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