Sense of Responsibility for Employees’
Financial Well-being Driving Companies to Broaden Financial
Educational Offering and Increase Accessibility
The vast majority of companies (83 percent) today feel a sense
of responsibility for the financial wellness of their employees,
impacting the benefits, resources and financial education they
offer, according to the latest Bank of America Merrill Lynch
Workplace Benefits Report. Based on a nationwide survey of 1,020
companies of all sizes, key insights from the annual report
include:
- Nearly three-quarters of plan sponsors
surveyed, including 90 percent of large companies (defined as those
with $100 million or more in 401(k) plan assets), believe that
financial wellness solutions will be standard elements of benefits
packages in the future, with large companies leading the way in
implementing programs.
- In the past year, the number of large
companies offering employees financial education on topics
including budgeting, planning for health care costs and managing
debt has significantly increased.
- While most plan sponsors recognize the
differing generational needs of their employee base, only a
fraction have made an effort to communicate and engage with
generations, particularly millennials, differently.
- Eighty-three percent of employers have
experienced a rise in health care costs over the past two years,
forcing them to make tough decisions about how to spend their
benefit dollars.
“Today’s plan sponsor must look beyond 401(k) enrollment and
participation. As the survey underscores, there is a growing need
for companies to consider their benefits offering more holistically
and provide more comprehensive financial education and solutions
that can address today’s challenges, such as managing rising health
care costs,” said David Tyrie, head of retirement and personal
wealth solutions for Bank of America Merrill Lynch. “We work with
employers to create workplace financial solutions with tools and
resources to empower employees to live their best financial
lives.”
Financial wellness becoming the new normal
Given the overwhelming sense of responsibilities felt by
employers, it is not surprising that financial wellness, offering
financial resources and education to foster the financial
well-being of an employee population, is evolving from a
“nice-to-have” into a “must-have” feature. Nearly three-quarters of
respondents anticipate that financial wellness programs will be
standard elements of benefits packages in 10 years.
Today, nearly one-quarter of plan sponsors have a strategy in
place to help employees improve their financial wellness, with more
intending to add it in the next two years. Adoption of financial
wellness programs is most notable among large firms where nearly
half (48 percent) of those surveyed have one, up from 35 percent in
2013.
Plan sponsors believe utilizing financial wellness programs also
makes good business sense, as those employees who use the programs
become more satisfied (78 percent), loyal (70 percent), engaged (68
percent) and productive (57 percent). However, only one out of
seven employers indicated they offer or are considering offering
incentives to employees to take advantage of the financial wellness
programs they provide.
Expanding education and accessibility
In light of the increasing emphasis on employees’ financial
wellness, companies are expanding educational resources and making
broader financial education and tools more accessible. The majority
(70 percent) of plan sponsors offer employees resources and
educational tools on saving for retirement, and four in 10 offer
guidance on planning for health care costs. While fewer plan
sponsors provide information on other financial management topics,
large firms have significantly increased their offering in many
areas since the last survey was conducted:
2013 Report 2015 Report Planning for
health care costs
46 percent
64 percent Budgeting 21 percent 40
percent Managing debt 22 percent 43 percent
To access resources, employees are most commonly utilizing
online tools to see their full financial picture (49 percent),
followed by a one-on-one relationship with a financial advisor (46
percent) and relevant research or literature to help with
investment decisions (45 percent). Additionally, eight in 10 plan
sponsors believe providing access to one-on-one guidance from a
financial professional can have a positive impact on the amount of
money employees save for retirement.
In line with the high adoption of online tools, nearly four in
10 plan sponsors have a total rewards, portal style of integrated
benefits management for employees. Of those, 72 percent believe
that employees understand how this information works to maximize
the value of their integrated benefits. Nearly one-quarter believe
that employees’ overall engagement with their benefits has
increased since implementation.
“More personalized guidance and education about an individual’s
entire financial picture, including savings and health care costs
can have a meaningful impact on a person’s long-term financial
health,” said Kim Kasin, managing director, Financial Guidance
executive at Bank of America Merrill Lynch. “Helping employees with
their financial life management can be positive for both employees
and employers. For employees, it helps to reduce financial stress;
and for companies, it makes good business sense because it helps
employees be more focused and productive at work.”
Millennials value benefits differently, but aren’t
communicated to differently
Benefits and resources, as well as how they are communicated,
are not one size fits all. Half (52 percent) of plan sponsors with
millennial employees believe millennials view benefits differently
than other generations. For example, 38 percent say millennial
employees value equity compensation more than other employees, and
nearly half (49 percent) of respondents also noted that millennials
prefer to invest on their own.
Despite these differences, only 12 percent of plan sponsors with
millennial employees have made an effort to use different
technologies or channels to communicate with and motivate
millennials to become more engaged with their benefits. Of those
who are using different technologies or channels to communicate
with and motivate millennials, texting (49 percent), LinkedIn (41
percent) and Facebook (38 percent) are the most popular channels.
Additionally, more than half (54 percent) of employers with
millennial employees cite that millennials can access their human
resources or benefits website via their smartphone.
The ripple effect of rising health care costs
Eighty-three percent of employers have experienced a rise in
health care costs over the past two years, on average by 11
percent. Among companies that have experienced an increase, 60
percent have passed along at least a portion to employees. While
reporting the highest increase in health care costs, small
companies (less than $5 million in 401(k) plan assets) were the
least likely to pass along the additional cost to employees.
With 80 percent of employers absorbing at least half, if not
all, of health care cost increases, HR professionals are faced with
tough decisions about how to spend their benefit dollars. Half
reported a significant to moderate impact on other benefits with 55
percent reducing spending as a result. Among those that reduced
spending, it was most commonly on:
- 401(k) plans and pension plans: 56
percent
- Employee education: 40 percent
- Equity compensation: 36 percent
- Non-qualified deferred compensation: 34
percent
One of the ways employers and employees are adapting is by
increasingly offering and utilizing health spending accounts
(HSAs), a tax-advantaged medical savings account, which can be used
if it is paired with a high-deductible health plan offering.
However, HSAs are not being leveraged to their fullest potential.
Eight in 10 report that they believe their employees view the
accounts mainly as near-term spending accounts rather than
long-term retirement savings vehicles.
In light of the changing landscape, most (74 percent) plan
sponsors feel they need to become more of an expert on health care
and retirement issues in order to do their job effectively. Six in
10 sponsors are spending more time on health care, while
approximately one-third are spending more time on the 401(k) plan,
hiring and firing and employee education.
For more findings from the Bank of America Merrill Lynch
Workplace Benefits Report and actionable advice for plan sponsors,
click here.
Workplace Benefits Report MethodologyBoston Research
Technologies completed a nationwide survey of 1,020 sponsors from
companies of all sizes from October 14 through December 4, 2014 on
behalf of Bank of America Merrill Lynch. To qualify for the online
survey, financial benefit plan sponsor companies had to offer a
401(k) plan ranging from: Small (less than $5 million in plan
assets); Core ($5 million to less than $100 million in plan
assets); and Mega ($100 million or more in plan assets). Quotas
were set to insure sufficient “Core” and “Mega” completes for
analysis purposes. The final sample was weighted back to
representative proportions based on plan size.
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