Liz Davidson, CEO of Financial Finesse, pointed out that the employee benefits landscape has changed. According to data from the Society for Human Resource Management, in 1990 about 40% of employees had a defined benefit retirement plan, but in 2012 only 21% of companies offered a traditional pension, and 6% of those were anticipating they will have to freeze or terminate their plans.
In addition, historically, 66% of employees had employer-sponsored health care coverage with generous benefits, but premiums have increased 131% for family coverage. Sixty-three percent of employees still have employer-sponsored coverage, but that includes high deductibles and out-of-pocket costs, and more changes are coming with implementation of the Affordable Care Act (ACA).Davidson said companies should combine benefits education with financial planning education. “That way, when there are changes, employees are equipped with the right attitude, tools and resources to navigate the changes,” she told webinar attendees.
Linda Robertson, a certified financial planner with Financial Finesse, said that employers may communicate benefit changes, but fail to provide employees with tools to manage the changes. ”Eighty-four percent of employees say they are suffering from financial stress, but most employers are not sufficiently addressing this issue,” she noted, adding that many employers are not implementing a long-term, multi-faceted financial wellness program.
Robertson said participants have questions when benefits change such as: How do I budget for these increased out of pocket costs? How much do I need to save for retirement now that my pension is frozen? Which investments should I choose to optimize my savings? She noted that some participants are confused, thinking they will not get a pension benefit because pension has been frozen, and some do not understand that utilizing a target-date fund is all the diversification they will need.
She recommends plan sponsors educate employees not just about the change in benefits, but how that change ties in to their financial goals. “Make sure they know where to go or who to call for additional information or guidance,” she added.Robertson offered an example from a plan sponsor it worked with that was eliminating retiree health care benefits. The sponsor’s communication campaign included information about Medicare and retiree health care expenses, as well as a retirement income calculator. The plan sponsor offered employees a checklist that included such steps as “use online retirement income calculator” and “set up payroll deduction for health savings account (HSA).” Employees were offered incentives to take certain actions.
According to Robertson, Financial Finesse has found communications tactics employees appreciate include:
- Post-enrollment confirmation of benefits elections;
- Personalized messages and materials reflecting individual needs and life stages;
- Benefits website;
- Enrollment opportunities throughout the year;
- One-on-one meetings;
- Decision support tools/calculators; and
- Suggested benefit actions and product options related to life events.
They also appreciate a multi-channel approach that may include an online financial learning center, a phone help line, onsite workshops and online webcasts.The bottom line is that a good communications or education program produces a return on investments (ROI) in the form of a reduced number of employees who delay retirement, lower turnover of talented employees, a decrease in financial stress and in turn, a decrease in health costs for employees, and increased use of wellness programs, the presenters concluded.