Archive

Go to:

December 2017
SMTWTFS
12
3456789
10111213141516
17181920212223
24252627282930
31
< Nov Jan >
Leaguer Email Subscription

You are not currently subscribed. Click Subscribe below to receive the Leaguer email.

Why More Employers Are Improving Financial Wellness Tools for Employees
Wednesday, August 3, 2016 6:40 AM

By Paul Chong, SVP Retirement Plan Services, CUNA Mutual Retirement Solutions

Recent research shows a big increase in American employers’ commitment in 2016 to do more to improve their employees’ financial wellness, such as teaching basic money skills and providing better retirement saving tools.

The credit union movement grew out of employers trying to serve their employees’ best financial interests, so we should be encouraged by these results. We should also help set the bar even higher by providing tools our own employees can use to make good financial decisions.

According to Aon Hewitt’s “2016 Hot Topics in Retirement and Financial Well-Being,”1 56 percent of U.S. employers said they were “very likely to create or focus on the financial well-being of employees in ways that expand beyond retirement decisions in 2016.”

In 2015, only 46 percent agreed with that statement, and in 2014 it was 40 percent.

Financial Wellness May Affect Work More Than Employers Know

The top reason for focusing on employees’ financial wellness was, “It’s the right thing to do,” chosen by 85 percent of the employers surveyed. The next three reasons were:

  • Improve employee engagement (80 percent)
  • Improve retirement statistics (58 percent)
  • Decrease employee time spent addressing financial issues (44 percent)

These are all good reasons to help employees get their financial houses in order. But employers may not understand how profoundly financial distress can affect employee productivity and customer service.

A relatively new area of research pioneered by Harvard economist Sendhil Mullainathan and Yale psychologist Eldar Shafir shows how people under financial stress can operate with tunnel vision and be less civil with others.

The concept is summarized in the 2013 book, Scarcity: Why Having Too Little Means So Much.2 The effect of a “scarcity mentality” goes far beyond employees spending too much time addressing their own financial issues. It can actually sap their daily ability to make good decisions and control their impulses.

Basic Financial Wellness Tools

What can employers do to help employees cope with day-to-day financial pressures? Aon Hewitt asked employers about whether they provide tools, services, and/or communications relating to seven areas under the umbrella of “financial well-being”1:

  • Debt management
  • Budgeting
  • Simple investment
  • Financial planning
  • Health care education
  • Savings and prioritization
  • Assistance with saving for specific life stages including buying a home or paying for college

If your credit union already offers assistance to employees for more than one of these areas, you’re doing better than more than half (55 percent) of the organizations surveyed.

The survey shows more promise for the immediate future, however. Almost a third of the respondents already offer assistance in at least four of these seven areas, and 46 percent say it’s “very likely” they’ll offer assistance in at least four by the end of 2016.

Action Steps for 3 Key Financial Wellness Areas

The survey respondents were asked about specific steps they are or will be taking to improve employees’ financial well-being. Here are some action items adapted from the Aon Hewitt material, and from our own observations of effective credit union employee benefits programs:

  1. Integrate financial planning, budgeting, and health decisions.
  • Communicate to employees that financial health can affect physical health, and vice versa.
  • Incorporate reminders about savings programs into your annual enrollment materials.
  • Provide access to tools and/or advisory services that can help employees nearing retirement age understand their Medicare and other health insurance options.
  1. Increase communication and education on basic money skills, and about the tools employees can use to reduce debt and plan for retirement.
  • Assess the level of automation, self-service, and web access employees have to basic money skills resources and to their retirement plan account.
  • Choose a web portal that allows employees to see their projected monthly retirement income at a glance. The portal should also allow them to adjust their contribution amounts and investment choices and see how those changes would affect their projected retirement income.
  • Target employees who are near retirement for extra information and professional advisory services that will help them make good decisions about debt management, Social Security and retirement account payout options at this critical stage.
  • Work with your retirement plan provider to offer employees access to professional advisory services through multiple channels: face-to-face, online, and phone. Ask providers to conduct retirement planning webinars and/or face-to-face training sessions for employees.
  1. Try to minimize unnecessary loans from retirement accounts.
  • Implement a waiting period between a loan payoff date and a new loan origination.
  • Collect data on participants who take out loans. Study the demographics of these participants and the underlying reason for the loans. This can help you target education and financial advice services.
  • Reduce the number of loans available.
  • Communicate with employees who take out loans or who have loans outstanding.
  • Offer debt counseling services.

In the credit union industry, part of our mission is to help members cope with financial hardship and prevent it. The best place to start fulfilling that mission is with our own employees.

Paul Chong is SVP CUNA Mutual Retirement Solutions and can be reached at paul.chong@cunamutual.com, 800-356-2644, ext. 665-8382.

1 “2016 Hot Topics in Retirement and Financial Well-Being,” Aon Hewitt, 2016

2 “Scarcity: Why Having Too Little Means So Much,” by Sendhil Mullainathan and Eldar Shafir, Times Books, Sendhil Mullainathan and Eldar Shafir, 2013

CUNA Mutual Retirement Solutions is a division of CUNA Mutual Group and the marketing name for CPI Qualified Plan Consultants, Inc., a CUNA Mutual Group member company. CUNA Mutual Group is endorsed by Credit Union Resources, a wholly owned subsidiary of Cornerstone Credit Union League.

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Annuity insurance products are issued by CMFG Life Insurance Company, located in Madison, Wisconsin. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. Securities distributed by CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 866.512.6109. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value, and are not obligations of or guaranteed by the financial institution. Representatives offer retirement and investment education but do not provide investment, legal or tax advice. Participants are encouraged to consult their own advisors.