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Boost Your Employees' Financial Wellbeing With These 7 Steps

Every organization recognizes that its workforce can take more actions to enhance their financial wellbeing. The challenge for employers is deciding which programs will have the most impact on the array of financial issues facing employees, from student debt to having enough money in retirement.

Three-fourths of organizations globally aim to have a financial wellbeing strategy in place by 2021.[1] This comes as half of U.S. employees find dealing with money stressful and 49% of early-career employees say they are just getting by financially, possibly because of student loans.[2] But better financial wellbeing doesn’t happen automatically.

As employers plan for uncertainty, forward-thinking HR leaders should consider seven concrete ways that they can boost employees’ financial wellbeing.


1. Identify the Most Significant Gaps

Organizations should review where they are to understand where they’re going. That starts by looking at how employees use health and wealth benefits. Are some groups of workers taking out retirement plan loans more than others? Do employees struggle with student loan debt? Are employees taking advantage of health savings accounts (HSAs)?

Some of the answers to these questions can be found by conducting employee surveys and focus groups to see what employees want and what benefits they value. It is also helpful to have a discussion with leadership about how financial wellbeing should fit into the organization’s total rewards strategy or employee value proposition.

Employers often overlook their vendors as a partner in collecting data to identify challenges to workforce financial wellbeing. Retirement plan recordkeepers and third-party administrators can provide organizations with benefits data, but it is important to analyze the aggregated data across programs in order to best understand the current challenges facing employees.


2. Review Best Practices

To discover what is specifically affecting the financial wellbeing of a workforce, organizations should analyze their data and benchmark it against industry best practices. In the retirement space, Aon has found that retirement readiness varies significantly by industry.[3] For example, a technology company may lack a robust retirement plan, but instead, offer generous stock options. The nuances of how industries structure total compensation will affect overall financial wellbeing.

Organizations should also benchmark their programs against those of their peers to understand if there are enhancements that should be made to remain competitive. For example, a financial planning benefit may be highly prevalent with peers and would meet a need for employees.


3. Target Your Financial Wellbeing Messages

Employers should strive to make any communication timely, personal, and actionable. For example, employers could message employees to save more for retirement with messages around the time they receive pay raises (timely) with a notice of whether they are on track to reach their retirement goals (personal) and a link to increase plan contributions if necessary (actionable.)

Data can be used to understand and segment an organization’s employee population. Customized visuals, infographics, and videos to help engage key employee groups based on demographics and specific financial wellbeing needs.

Choose the appropriate communication modality for each segmented message. Email and online seminars may be ideal for office workers, for instance, but would not appeal to manufacturing or retail workers who are not at a desk all day.


4. Embrace Innovation and Outsourcing

The retirement benefits landscape is changing rapidly. Organizations can revolutionize their retirement plan offering with pooled employer plans, available on January 1, 2021.

Created by the SECURE Act of 2020, pooled employer plans allow companies to come together and jointly deliver retirement benefits. The law makes it easier for retirement plans to offer lifetime income options. These investments can reframe the financial wellbeing decisions employees make because plans are required to project retirement savings not only as a lump sum, but also as a monthly income stream. The SECURE Act removes regulatory barriers, such as the common nexus requirement and one-bad-apple rule, allowing employers that otherwise couldn’t participate in pooled plans to offer these retirement benefits.

The scale of a pooled employer plan enables them to provide employees with best-in-class features, such as lifetime income options and automatic enrollment and escalation, that can dramatically improve retirement readiness. Smaller sponsors of retirement plans may not be able to afford these features without using a PEP.

The efficiencies generated by employers working together through a PEP provides employees access to investment options with lower fees, which translates to larger projected retirement savings. The PEP also creates a purposeful investment menu that can drive overall retirement outcomes better than traditional 401(k) plans that have cobbled together investment options over time.

Pooled employer plans are the next evolution in retirement benefits and may transform the marketplace similar to how 401(k)s reshaped the pension landscape decades ago. With a PEP, employers can outsource the day-to-day administration and offload the fiduciary risk of providing retirement benefits. The transformative nature of this innovation is why Aon created its own PEP for employers.

Retirement benefits aren’t the only area where employers can innovate and outsource. Aon Local Advantage (ALA) can keep health care costs down and help employees find the right type of plans that they appreciate and value. ALA combined with the Aon PEP can provide the integrated solution employers need to improve financial wellbeing outcomes for employers. Ultimately, these services can ease the burden on HR departments so they can focus more on financial wellbeing programs.


5. Link Health and Wealth Benefits Through Education

In general, employees are over-insuring on healthcare benefits while under-saving on their retirement benefits.

More education and tools can help employees strike the right balance of benefits. For example, employers have an opportunity to explain to workers how health savings accounts (HSAs), coupled with a high-deductible health plan, can increase retirement readiness.

Employers can design recommended HSA contribution limits to help employees understand their health and wellbeing savings options.

Financial wellbeing is part of overall wellbeing. People with financial stress tend to have physical or emotional wellbeing issues as well. Treating financial wellbeing as a part of the holistic benefits package can help to address root causes and improve overall employee wellbeing.


6. Leverage Your Vendors

If employers sponsor retirement plans, their recordkeepers and other vendors may provide tools to help participants access their budget, savings, debt, credit, and retirement goals.

Many vendors provide financial wellbeing benefits that come at no cost to employers, or they may have preferred pricing partnerships with outside vendors. For example, student loan refinancing may be an appropriate solution for organizations with a population of young workers and can typically be provided at no cost to employers.

Employers should vet vendor resources and integrate their offerings into a cohesive financial wellbeing program. If an employer were to provide student loan refinancing to workers, they should also have some education about the trade-offs of refinancing versus federal student loan protections.


7. Design Integrated Financial Wellbeing Programs

Health and wealth benefits can be overwhelming and confusing to employees. The integration of these benefits helps employees understand and appreciate what their employers provide. Organizations may be tempted to introduce another point solution to address financial wellbeing into the mix. But without an overall benefits strategy, such additions can be counterproductive.

A more flexible and integrated approach to benefits can provide additional financial wellbeing. A thoughtful and comprehensive program that considers how employees behave from the beginning of their careers through their retirement can drive meaningful results that will improve lives and enhance productivity and engagement.


The Four P’s of Financial Wellbeing

Employers can break financial wellbeing into distinct categories to better assess their overall strategy based on the four Ps:

Prepare: It’s the most basic level of financial wellbeing that is focused on short-term financial issues. In this category, employers should focus on providing financial education and tools to help with budgeting, savings, student loans, and credit card debt.
Plan: This is the most comprehensive area of financial wellbeing that is focused on long-term financial issues. Here employees may need guidance, advice, and coaching to save for retirement, health care, and education for their children.
Protect: Employees often overlook this area of financial wellbeing. It’s about making sure they have the insurance coverages that minimize the damage from loss of income, critical illness, disability, and other risks.
Preserve: To improve retirement readiness, organizations should consider how employees will make their retirement savings last for their lifetime. This can be done through lifetime income solutions, education on Social Security benefits, and support for estate planning.

[1] Aon Global Financial Wellbeing Study, 2018

[2] Aon DC and Financial Wellbeing Global Employee Survey, 2018

[3] The Real Deal - 2018 Retirement Income Adequacy Study, 2018

© Aon plc 2021. All rights reserved.

This publication contains general information only and is intended to provide an overview of coverages. The information is not intended to constitute legal or other professional advice. Please refer to insurer’s policy wordings for actual terms, conditions, exclusions and limitations on coverage that may apply. For more specific information on how we can assist, please contact Aon.