Focus on Financial Wellness Catching Hold
Are we approaching a tipping point in the effort to foster active interest in financial wellness — and in the process, improving prospects for financial readiness for retirement? A new report indicates that such may be the case.
As the new century — not so new now — dawned, employers’ focus was largely on fostering a fuller understanding and appreciation of the plans they offered, particularly defined contribution plans, says AonHewitt in “2016 Hot Topics in Retirement and Financial Well-Being
.” AonHewitt argues that as they emerged from the debris of the Great Recession, employers and plan sponsors’ emphasis shifted to mitigating risk and taking a closer look at the designs of their retirement plans and whether they were appropriate for the well being of all parties.
But now, AonHewitt says, something else is happening. Now, it perceives a shift to other ways
of assisting employees to achieve financial wellness.
Employers are showing greater interest in financial wellness, the report says. Almost 60% say it is more important to them; last year, just under half did so. And 40% assign it the same importance as before.
The report says that 89% of 254 plan sponsor respondents indicate they are likely to focus on the financial well being of employees in a way that encompasses more than their retirement decisions. And more than half of them said they are very likely to do so. This sentiment has become markedly more widespread in a short time: In 2015, 46% were very likely, and in 2014 30%.
Maybe that sharp increase was to be expected: AonHewitt says that 55% of the employers that responded already offer employees assistance in at least one area of financial well being, and 38% do so in at least three ways. And its crystal ball shows 77% and 52% of employers, respectively, doing so by New Year’s Eve.
While the report cites “wide accord” on the desire to expand those initiatives, unity of focus remains elusive. The survey asked plan sponsors about their program offerings on seven different fronts, and while nearly each category saw increased implementation from a year ago, no one area was offered by a majority of responding employers. Those areas of focus were:
- basics of financial markets (43%, up from 41% a year ago)
- budgeting (34%, up from 26%)
- debt management (33%, up from 25%)
- financial planning (33%, up from 29%)
- health care planning (31%, down from 32%)
- saving for life stages (28%, up from 22%)
- prioritizing savings (27%; was not asked in 2015)
Motivations for offering these programs differed as well. The most common was “it’s the right thing to do,” acknowledged by 85%, while “increasing employee engagement” drew nearly as much support (80%). Improving retirement statistics motivated 58% of respondents, while 44% said decreasing employee time spent addressing financial issues was their impetus. Only about a quarter (26%) said their motivation was to decrease medical costs, and just a third indicated that workers were asking for these programs.
AonHewitt says that this year, it expects that employers will be:
- offering employees a wide range of tools and services by which they can improve their financial well-being;
- providing more help to employees approaching retirement in order to help them navigate the retirement process; and
- paying attention to ways they can help employees preserve money earmarked for retirement income.
The study adds that plan sponsors are considering additional retirement plan options, and that the ones they are most likely to pursue this year include:
- online modeling tools or apps to help participants determine retirement spending (26%)
- allowing participants to elect automatic payment from the plan over an extended period (13%)
- managed account with drawdown feature within the plan (10%)
- managed payout funds within the plan (7%)
- annuity or insurance products as part of the fund lineup (5%)
- facilitating purchasing annuities outside the plan (2%)
- the ability to transfer assets to a DB plan in order to receive an annuity (1%)