Thinking About Adding a Financial Wellness Program? Here are Three Things to Consider
Callan’s 16th annual “Defined Contribution (DC) Trends Survey” offers the latest developments on a number of retirement plan topics, including SECURE 2.0 (prior to passage), diversity, equity and inclusion, plan design, governance, legislation, investment management and participant advice. If you’re thinking about implementing a financial wellness program for your employees, the survey also offers key insights into the process, including the following three key components.
Designing and Monitoring a Program
The survey found that the responsibility for designing and monitoring the financial wellness program most often lands on the Human Resource staff’s plate, rather than a governance committee. In addition, unlike most defined contribution plans, financial wellness generally does not fall under the Employee Retirement Income Security Act of 1974. This means employers that add benefits outside the existing legislative or regulatory framework do so at some level of risk. The survey’s authors also suggest that plan sponsors consider how to best monitor and manage these benefits. While the two programs (retirement and financial wellness) may interact, they are typically monitored by separate people or teams, which can lead to efficiency gaps. DC plan fiduciaries may require regular reporting on the financial wellness program in conjunction with their ongoing plan monitoring to ensure both programs are operating optimally.
Prioritizing Needs and Objectives
The survey revealed that the top financial wellness needs were in the areas of savings behaviors and roadblocks to saving, including budgeting and debt management. Nine out of 10 respondents indicated retirement savings was a top financial need (3.9 weighted average rank out of 5). Sixty-three percent highlighted emergency savings needs (2.3) and 56% called out either budgeting (2.0) or debt management (1.8). One-quarter reported offering some sort of incentives to participate in a financial wellness program.
Means of Soliciting Employee Financial Wellness Needs
Internal Survey.......................................... 41%
Individual Feedback.................................. 19%
Focus Group................................................ 6%
No Means.................................................. 25%
Top Financial Needs Identified
Retirement Savings..................................... 3.9
Emergency Savings..................................... 2.3
Budgeting..................................................... 2.0
Debt Management....................................... 1.8
Healthcare Spending................................... 1.6
Student Loans.............................................. 1.5
5 = most important. Total ranking is a weighted average score.
Measuring Effectiveness and Determining Success
Respondents prioritized usage, participant feedback or surveys, and return on investment to measure financial wellness program success.
Top Criteria To Gauge Success of Financial Wellness Program
Usage .......................................................... 4.6
Participant Feedback or Surveys ............... 2.5
Return on Investment ................................. 1.8
Impact on DC Plan Savings Behaviors ...... 1.8
Increased Engagement .............................. 1.6
Cost ............................................................. 1.2
Ease of Administration ............................... 1.1
5 = most important. Total ranking is a weighted average score.
Callan’s 2023 “Defined Contribution (DC) Plans Survey” can be viewed at https://tinyurl.com/2p8ty75h. A free registration is required to access the survey.
For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
©2023 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.