Drive 401(k) participation by tying to Open Enrollment

contribution changes to 401(k) plans during open enrollment, employers have seen an increase in participation.   The study showed an 11% year-over-year increase in the number of employees making a change to their retirement plan election as a result of the association with the health care open enrollment period.  And nearly all of these election changes were positive (93%), meaning employees started or increased contributions to a plan.

While Health & Welfare benefits enjoy an annual period for employees to reflect on their needs and make adjustments, retirement plans have not historically enjoyed this kind of attention.  And studies show that it’s sorely needed.  This Open Enrollment period, consider offering some communications dedicated to your 401(k) plan and provide easy access to make changes.  You may be surprised at how many employees engage.

Start with a Financial Health Assessment

initiatives are:   (1) becoming much more comprehensive and (2) demonstrating tangible business value.

In our own experiences with HR professionals, we see the expansion every day.  Wellness strategies are evolving and many employers are looking to better understand how employee money issues are impacting the productivity of their organization.

Sound overwhelming?  Well, it doesn’t have to be.

If you’re looking for a simple and cost-effective way to get your arms around financial wellness, we recommend starting with a financial health assessment. Think of it as a biometric screening of an employee’s financial health. Once you understand which issues are impacting employee productivity the most, you can confidently introduce programs that address the highest priority problems.  And, with an annual assessment, you can measure the progress you’ve made and demonstrate value.

Here are some important qualities that you’ll want to look for in an employee financial health assessment:

1. Be sure it addresses the complete financial picture. In addition to retirement, you’ll want to dig into credit/debt, personal protection and basic cash flow and budgeting issues.  Just as important is measuring the level of financial stress that employees are under which can have damaging impacts on productivity.  The Personal Finance Employee Education Foundation offers a Personal Financial Wellness Scale (free of charge) well suited to measuring financial stress.
2. Be clear about your intentions.  When it comes to something as personal as money, many employees may be reluctant to share information with their employer.  We recommend that employers only view the data in aggregate and be clear in communications with employees about what the data is being used for.
3. Keep it short and offer an incentive.  In addition to effective communications, keeping the assessment to 10 minutes in length and offering an incentive will really help drive participation rates.  Many of our customers have seen success with gift cards, deposits into a 401(k) or HSA and of course cash works too.
4. Reporting should be actionable – for employee and employer.  Upon completion of the assessment, an employee should receive immediate and easy to understand feedback about how to improve their personal situation.  For employers, it’s important to recognize that at the end of the assessment all you’ve got is data.  The hard part is in interpreting it.  Be sure that you have a capable team working with you that can benchmark the results, prioritize issues and provide you with actionable conclusions.
5. On-ramp to a full solution.  So, 37% of your employees are struggling with debt issues.  Now what?  You may want to choose an assessment provider that can offer an easy transition to education and services.

Engage employees with video and social media

Video and social media are the way to engage employees these days, says Brian Baker, Vice President at Aon Hewitt Consultants, in a recent interview with Benefits TV.

Baker discusses balancing the “tell” with the “show” by crafting benefits messages using video.

Aon Hewitt presents their four Cs to an effective strategy for employee benefits communications and change management-through-engagement. They recommend utilizing video and social mediums to disseminate communications that are:

• Creative: all communications must have a relevant, creative component.
• Customized: representative of your particular employee demographic and segment.
• Cultural: going beyond corporate culture to take into account race, ethnicity, regional and business unit culture.
• Combined: all pieces must be delivered in combination to be successful.

Employees seek retirement advice from their employers

A majority of people have agreed they would like more guidance from their employer about how to achieve retirement goals according to the 11^th Annual Transamerica Retirement Survey.

Perhaps not surprisingly, employees with a higher overall education level are more likely to be financially well in retirement. Only 63% of employees with only a high school diploma participated in a retirement plan, as opposed to 84% of those with a college degree.

But all education levels showed a desire for direction from their employers.

More than half of all surveyed, agreed that they would like more information and advice from their employer about how to reach retirement goals. In fact, employees surveyed indicated that “educational materials that are easier to understand” is the second biggest motivator in getting an employee to learn more about saving and investing for retirement (behind tax breaks/incentives).

Investing in better retirement education for employees is a cost-effective way to motivate employees to save for their retirement and ensure their financial wellness.

Benefits Communications Turn Risk Into Opportunity

As the economy improves, the tide may be turning once again according to several new studies.   Here are some key findings:

• Up to 60% of top performing employees plan to leave their organization within the next year
• In October 2010, the number of employees voluntarily quitting their jobs surpassed involuntary terminations
• Employees will be giving more serious consideration to new job opportunities than they would have in the past
• Employee engagement is at a historical low – some employees spend up to 50% of their time looking for another job

Think: risk and opportunity.

It’s time once again to use benefits as a strategic tool to keep your best employees and get new stars in the door. And don’t forget, your success is as much about how your benefits are communicated as the benefits themselves.

Employees Remain Cautious

according to the Q4:2010 Principal Financial Well-Being Index survey.  Here are some of the key takeaways:

• Half of employees did not feel better about their financial situation than they did a year ago. Nearly 40% of employees were still cautious about the economy.
• 72% of employees are concerned about their long-term financial future.
• Health care costs (65%) and economic uncertainty (59%) topped their short-term concerns.
• Living within their means (62%) and having an emergency fund (46%) were employees’ main priorities as they re-build their financial well-being.

While this data can be helpful as a benchmark, it’s always best to assess your own employees to understand their specific concerns and issues when it comes to money.   From this assessment, you can build the most effective financial wellness programs and have the greatest impact on the well being of your population.

Better education leads to higher FSA enrollment, which saves employers money on taxes.

Good benefits communication can raise employee Flexible Spending Account enrollment by 20% or more, a recent study found. The benefits of an FSA may be obvious to the seasoned HR Director, but not all employees – or employers – know how valuable these accounts can be.

Both employee and employer enjoy significant tax savings when FSAs are used. Employees save on federal and FICA taxes, plus any additional state and local taxes on medical items paid for through their FSA.

Employers, meanwhile, avoid the 7.65% FICA tax on employee wages. Based on the average annual contribution of $1,340, employers can save $100 per employee. 100 new participants means an average $10,000 in savings per year.

The study set four keys to a successful FSA enrollment campaign:

Know your audience. The study found these statistics about FSA participants:

• Average age: 43
• Marital status: 67% married (59% with children)
• Median income: $55,000-$65,000
• Key benefits decision-maker: Female

The study also found that employees use FSAs to reduce their taxable income, cover gaps in health plans, and finance dependent care.

Craft Key Messages. Clear up common misunderstandings, while highlighting key points clearly and concisely.  For example:

• An FSA is not another deduction, but money already being spent.
• The depth and breadth of eligible expenses, i.e. vision care to day care.

With FSAs, it’s easy to get bogged down in the details so be sure that you really focus on what most employees need to know to make a decision.

Select Methods of Communication. You probably don’t need to be convinced that these days employees across most demographics are accessing this type of information on the web.  Try and stay away from lengthy, static PDFs and brochures and avoid locking your materials behind the firewall, where family decision makers can’t get to it easily.  Putting together a short video on the benefit can be a really effective way to provide something engaging while allowing you to explain the benefit in more conversational terms.

Schedule Enrollment Communications. Reach out to employees up to 6 months in advance with education, as well as re-enrollment and qualified change in status communications.

Mega-Trends That Will Change Wellness Communication… Forever.”

Financial Wellness is a Key Component of your Wellness Strategy

Note trend #7, “Snacking well and saving well are connected.”  The study notes that smart wellness programs integrate financial and health literacy topics.  More and more, traditional health wellness companies and employers alike are beginning to recognize employee financial health issues as a key issue to address in a complete wellness program.

Other notable findings included:

• 51% of employers surveyed saw an increase in employee wage garnishments
• 42% of employers surveyed saw an increase in employee emergency loans
• 34% employers surveyed saw an increase in employee requests for time off to deal with personal financial issues
• While 88% of employers provide retirement plan education, only 28% provide basic financial education on critical items such as budgeting, debt reduction and credit management.

One thing to focus on here is that 70% of survey respondents believe financial education is important and yet only 28% claim to offer a program.  What is the reason for this gap?

Employers surveyed cite cost, sacrificed work time to attend and higher priority competing items.  Let’s talk this through:

• Cost.  There has long been a misperception about the cost of financial wellness programs.  In our experience, companies can provide a financial wellness benefit for a cost equivalent to 1-2 employee lunches per year.  Not bad.
• Sacrificed work time.  A good financial wellness solution will offer online education (24/7 access), seminars and a financial coaching benefit.  All of these items can be made available to employees outside of normal work hours.  Even if these services are being used during work hours, it is likely far less than the time spent missing work and/or distracted on the job because of personal financial issues.
• Higher priority items.  While this one is hard to address without seeing the prioritized list, financial issues are likely one of the largest drains on productivity in organizations today.  A comprehensive financial wellness solution can produce an ROI to organizations of well over 3 to 1.

So, the natural question is why a credit score of all things would be used to evaluate a prospective employee?

One likely reason might be that employers worry that a poor credit score indicates a lack of responsibility that could ultimately translate into poor performance.

Credit score indicative of a poor performer?

But there may be another important reason…or, at least there should be.  The impact of poor employee financial health on corporate productivity has been well publicized in the wake of a troubled U.S. economy.  Many employers may feel that employees with poor credit are likely to spend significant time at work worrying about or dealing with their personal financial issues.  Or, worse yet, miss work entirely.

Whether or not a FICO score is a suitable barometer for a candidate’s future success, these results reveal that in the minds of many employers, there is an important link between control over personal finances and job performance.

But what about existing employees?

Employers might make more productive use of this link by introducing broad financial wellness education to current employees, rather than simply focusing on the credit histories of a few new hires – especially considering that credit reports are often explicable or simply inaccurate.

Many states are pushing to make the investigation of credit histories by prospective employers illegal. Employers will need to find a new tactic to ensure the financial health of their workforce.  A comprehensive financial wellness initiative can be a much more effective means towards this desired goal.