The Employer Role in Financial Wellbeing

By Katherine Fernandes

Wellbeing is a term that is used often and historically focuses on physical or mental/emotional health.  However, those aspects are just a few components to the multi-dimensional equation that is total wellbeing.

Tom Rath and Jim Harter, who quite literally wrote the book on wellbeing, have proposed there are actually five core components of wellbeing all of which require satisfaction in order for a person to live a healthy and whole life: Career, Social, Community, Physical and Financial. Wellbeing: The Five Essential Elements.

Employers have a huge role to play in the overall wellbeing of their employees.  In fact, there is great opportunity in creating a workplace that provides support in each of the five dimensions of wellbeing.  A well employee is likely an engaged employee and an engaged employee is much harder for your competition to poach. 

Financial Wellbeing is a growing focus of many corporate engagement strategies. The labor market is historically tight and employee earnings have been on the rise.  Yet, a 2017 Prudential report The State of Wellness in America found that more than 50% of employees report feeling at least moderate levels of financial stress.

It is important to note that financial stress impacts individuals of all ages and income levels.  Younger employees may delay funding their retirement plans in lieu of paying off lingering student loan debt.  Older employees may delay their desired retirement start date in order to continue working.   All employees experiencing financial stress are more likely to be less engaged at work and to experience related health issues such as fatigue, depression, anxiety and obesity. Seeing and understanding these signs provides Human Resources with directional guidance on what strategies and solutions to use in their company.

Findings from Gallagher’s 2019 Retirement Pulse Survey revealthata total of 65% of employers have either launched a financial wellbeing program or are considering adding one. Employers have an opportunity to reevaluate their current strategy in supporting employee Financial Wellbeing and to deploy some of the following new tools into the total employee rewards package to recruit, retain, reward and engage their workforce.

Student Debt Relief
The Pew Research Center has found that two in five employees under 30 are carrying student loan debt at an average of $17,000 while many older employees are incurring new debt to support children or grandchildren pursuing higher education.  With no end in sight to rising tuition costs it’s a great time for employers to roll out new tuition support or student debt relief programs like:

• Save-Up Contributions toward existing 529 plans for employees saving for a child or grandchild’s education.
• Student Loan Debt repayment programs which provide employer contributions toward repaying existing student loans.  Think $50+ per month in employer contributions toward student loan debt repayment.

Financial Counseling and Education Resources
In the 2019 Gallagher Benefits Strategy & Benchmarking Survey over a third of employers indicated they provide a resource for employees to use regarding financial counseling or education.  This can be something as inexpensive and easily deployed as an online resource or something more robust like onsite financial counseling sessions.  Financial themed lunch & learn sessions are also a great way to allow employees to engage in their own financial wellbeing.

Voluntary Benefits
These increasingly popular plans (Critical Illness/Accident/Hospital Indemnity) provide employees with the option to purchase coverage for themselves which will pay out should they experience certain health events.  These products provide additional income allowing employees to focus on getting better rather than financial strain.

Matching Employer Health Saving Account (HSA) Contributions
With HSA Qualified plans being the second most popular medical plan offering (second only to PPO plans), more employees than ever have an HSA.  These triple tax advantaged accounts allow employees to save, accumulate and spend their HSA dollars without incurring taxes (provided the expenses are eligible).  As employees get older and account balances grow they start to look and feel more like a secondary retirement account which can ultimately be used for Medicare premiums and health expenses in retirement.  Employer contributions toward the account can be funded as a matching contribution up to a maximum annual amount.  This strategy incentivizes employees to set their own funds aside and helps create a larger account balance to be used for health expenses well into retirement.

Executive Benefits
Core benefit plans like company-paid life or disability insurance are often structured to provide a level of income replacement commiserate with the average employee wage.  Many times the benefit maximums on these plans are not high enough to account for the higher incomes of the highly compensated or key employee population.  And in fact, these valued employees are under-insured.  It’s important to make sure that even our higher earning employees are adequately covered for a disability or life event.

These tools along with a competitive core retirement program go a long way toward supporting employee Financial Wellbeing and in turn maintaining a present and engaged team at your organization.

This material was created to provide accurate and reliable information on the subjects covered, but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.  

Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co., (Gallagher) is a non-investment firm that provides employee benefit and retirement plan consulting services to employers. Securities may be offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment advisory services may be offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Certain appropriately licensed individuals of Gallagher are registered to offer securities through Kestra IS or investment advisory services through Kestra AS. Neither Kestra IS nor Kestra AS are affiliated with Gallagher. Neither Kestra IS, Kestra AS, Gallagher, their affiliates nor representatives provide accounting, legal or tax advice.  GBS/Kestra-CD(344046)(exp032021)