We’ve heard many employers across a range of industries express concerns about the long term financial well-being of their employees, which is great because the Employee Benefit Research Institute (EBRI), among other organizations, continues to find the retirement confidence levels of Americans lacking. In fact, according to the EBRI, “only a minority of all workers appear to be taking basic steps needed to prepare for retirement.” Not to mention, the financial woes they are dealing with in the present.
The Impact Of Financial Well-being
Employers choose to focus on financial well-being programs for a multitude of reasons. There are some who believe that preparing their employees for retirement is just the right thing to do, while others hope to improve employee engagement and retention.
According to the Financial Education for Today’s Workforce: 2016 Survey, which examines retirement and financial education offerings in the U.S. and Canada, employees under financial stress create challenges for the organization. But by providing employees with the education needed to improve their financial well-being, employers are in an excellent position to attract and retain a more focused, engaged and healthier workforce. The impact on the bottom line can be substantial.
But how does an employer go about reversing this frightening trend? What can be done to make the financial well-being of the majority of Americans (instead of the minority) a reality?
Make Financial Wellness A Priority
Well, in my experience, one of the first steps a business owner can take to promote financial well-being throughout their organization is to create a program that will reinforce an overall financial well-being strategy. Your company’s program should work to educate employees on:
- The basics of financial markets/simple investing.
- Healthcare education and planning.
- Financial planning.
- Prioritizing savings.
- Debt management.
- Assistance with savings during life stages.
Retirement Income Solutions
Some employers have helped their employees save for retirement through the implementation of 401(k) and profit sharing plans. This method allows plan participants to receive payments over an extended period of time so that their savings can be converted into lifetime income. Examples of these solutions include:
- Online modeling tools or mobile apps that help participants determine how much they can spend each year in retirement.
- A plan distribution option that allows participants to elect an automatic payment from the plan over an extended period of time.
- The option to purchase annuities outside the plan for plan distributions.
- Offering annuity or insurance products within the plan as part of the fund lineup.
- A Qualified Longevity Annuity Contract (QLAC) that permits an in-plan deferred annuity purchase
- The ability to transfer assets to a defined benefit plan in order to receive an annuity.
Employers who maintain a 401(k) and profit sharing plan are generally committed to ensuring that their workers are participating in the plan and that they are saving at appropriate rates. To achieve this they focus on:
- Increasing Participation: Growing the number of eligible employees who actively save in the plan.
- Retaining Assets: Encouraging individuals to keep their assets in the plan upon retirement or termination.
- Consolidating Assets: Encouraging individuals to roll their other assets into the plan.
- Discouraging Cash Outs: Encouraging terminated employees to keep their assets focused on retirement savings.
- Improving Diversification: Encouraging participants to invest in a diversified asset mix.
- Minimize Leakage: Discourage plan loans and withdrawals.
- Encouraging Higher Contribution Rates: Allocating a greater percentage of pay to retirement savings.
- Recognizing Retirement Readiness: Helping participants understand their retirement savings needs and having plans in place to reach retirement savings goals.
To learn more about the impact retirement readiness and overall financial wellness has on your business or to identify options that make sense for you, email a member of Rea’s retirement services team.
By Angie Isakson, QKA (Dublin office)
The Path To Financial Wellness Starts With A Penny
Learn more about the impact your employee’s financial wellness can have on your bottom line. Listen to episode 19: it starts with a penny on unsuitable on Rea Radio, Rea & Associates’ award-winning business podcast.