Data & Research May 24, 2023

Custom Programs Can Reduce Black, Hispanic Employees’ Financial Stress

Targeted coaching for Black and Hispanic employee resource groups led to reduced financial stress for workers, according to Financial Finesse.

 

 

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Custom financial wellness programs for employees of color have been particularly effective at alleviating participants’ financial concerns, according to the new “Workplace Financial Wellness in America” report from Financial Finesse. In a study conducted between April 1, 2021, and December 31, 2022, and based on responses from 34,168 employees, targeted programming for Black and Hispanic employee resource groups led to a 25% decrease in participants reporting high levels of financial stress.

“Employee resource groups are an excellent avenue for helping increase the engagement among people of different demographics,” said Greg Ward, director of Financial Finesse’s Financial Wellness Think Tank and author of the report, in a webinar held on Tuesday. “Every situation is unique. One thing that we have strived to do is work exclusively with each of our client partners to develop a custom approach to addressing the needs of their workforce.”

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Black and Hispanic individuals faced the highest levels of financial stress, the Financial Finesse research found. In 2022, the Black and Hispanic populations surveyed were 38% and 28% less likely, respectively, to have a positive cash flow than their white counterparts. Gender also affected the financial preparedness among people of color.

“[People] having a median household income between $60,000 and $75,000 tend to be those on the younger side, but what is troubling is that there is a disproportionate representation of female Black and Hispanic employees within this population,” Ward said during the webinar. “Sixty percent of users of the financial wellness coaching benefit are female, 13% Black, 10% Hispanic. But when you look at the population that’s in crisis level, you can see it’s disproportionately female, disproportionately people of color.”

Black and Latino communities face greater barriers when saving than their white and Asian American counterparts, which can negatively impact retirement outcomes, Voya Financial found in a study released in April. Voya’s researchers found that Black and Latino employees have lower levels of financial confidence: 59% of white and 56% of Asian American employees expressed financial confidence, compared to 43% of Latino and 37% of Black employees.

Ward said Financial Finesse hopes employee resource groups will help close gaps in racial financial wellness. The report found that Black and Hispanic employee resource groups saw a 23% increase in financial resilience among participants. They were able to live within their means, have less high-interest debt and maintain an emergency fund, according to the research. Employees’ retirement confidence doubled, and 34% of participants engaged with an employee resource group for the first time.

“People tend to want to work with people who look like them,” said Ward. “That’s why when we look at the marketing information, when we look at the coaches that are delivering the content, we want to make sure that there is diversity and representation of a diverse workforce in all of the communications, as well as the delivery of the initiatives and coaching. I think that speaks to why that engagement number was so high.”
Compliance May 23, 2023

Retirement Clearinghouse Issues Alert of IRA Data Breach

Firm alerts more than 10,000 people to watch out for identify theft after Social Security and IRA numbers may have been exposed.

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Retirement Clearinghouse LLC, an industry leader in driving forward the automatic portability of retirement plans, has alerted more than 10,500 individuals that their personal data, including individual retirement account numbers, may have been compromised.

The organization alerted individuals with written notice, dated May 12, that their information may be at risk for fraud, according to public filings in the states where they are located.

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“We identified that between March 15 and 16, 2023, a small number of files were at risk of access without authorization,” the firm wrote in the letter. “Because of this, we took measures to ensure the security of the files and notify potentially affected individuals about this matter.”

According to the firm, the files included people’s names, Social Security numbers and IRA account numbers held by Matrix Trust Co., a division of Broadridge Financial Solutions that provides services including IRA administration, rollovers and third-party administration recordkeeping. The letter sent by Charlotte, North Carolina-based Retirement Clearinghouse offered a complimentary, three-month membership to an identity protection product to help monitor identity theft or fraud.

“The phishing incident did not affect the network that the firm is establishing with large retirement recordkeepers to reunite small 401(k) balances with their owners,” Retirement Clearinghouse CEO Spencer Williams said in an emailed statement. The clearinghouse also wrote in the letter that it is “evaluating additional safeguards to mitigate recurrence of this type of event.”

Broadridge wrote in a statement that it is “coordinating with Retirement Clearinghouse in their efforts to inform all impacted individuals of this situation and the services being offered to protect their data.” 

Ignites first reported the breach notifications.

Protection of consumer information within retirement savings plans has been a key focus for the industry in recent years, with the Department of Labor’s Employee Benefits Security Administration issuing cybersecurity guidance, tips and best practices regarding retirement benefits in April 2021. The SPARK [Society of Professional Asset Managers and Recordkeepers] Institute has also been focused on improving cybersecurity in the space, including a November 2022 plan sponsor and adviser guide to cybersecurity best practices.

“We see the cyber breaches across our lives almost every day; we have, in fact, gotten immune to new news,”  says Jay Gepfert, CEO of DOL Cybersecurity LLC, which provides third-party evaluation of the DOL’s cybersecurity guidelines.

Gepfert notes that there are two levels of potential breaches: a “breach by the recordkeeper directly” and a “breach into an account due to participant fault.” He notes that his firm’s research shows that more than 75% of breaches come from individual human error, usually due to one of the various methods to gain access being compromised.  

“Most of the large, national recordkeepers have for years spent large amounts of money on their cyber systems and procedures,” Gepfert says. “This includes both from a technical perspective and training of employees on how to handle the expanding volume of attempts to gain access. … The real weak point for gaining access is through employees and participants.”

The Retirement Clearinghouse’s auto-portability network has brought together retirement recordkeepers, retirement solutions providers and plan sponsors to improve auto-portability among retirement plan participants and reduce savings leakage. The network includes financial firms such as Empower, Fidelity Investments, TIAA and Vanguard and represents about 62 million workers and 139,000 employer-sponsored retirement plans. 

According to the public filings, Retirement Clearinghouse saw suspicious activity on one email account on March 15 and 16 and alerted the organization most likely to be affected by the breach. After an investigation, Retirement Clearinghouse reported the breach and began contacting participants with the offer of complimentary use of Experian’s IdentityWorks product to detect and resolve identity theft. The firm also provided the individuals with information on how to place a fraud alert and credit freeze on their finances and with contact details for national consumer reporting agencies.

The states involved in the breach included Maine, Maryland, New York, North Carolina and Rhode Island, as well as Washington, D.C., according to the public filings.

Retirement cybersecurity expert Gepfert notes six key tactics to help people avoid becoming part of the 75% of human mistakes that let in bad actors. They are: changing privacy settings on phones and computers; keeping software applications and operating systems up-to-date; creating strong passwords; using two methods of verification; learning about phishing email scams; and not sharing login information with other individuals.

Gepfert expects more cybersecurity guidance on retirement plan protection coming from the DOL in the near future. That is in part because plan sponsors are still in the process of reacting to the initial guidance, and further nudges may be needed for the guidance to “run downhill.”

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