Financial wellness programs are typically paid for out of the company’s general budget, but if plan sponsors need another way, they might look in the Employee Retirement Income Security Act (ERISA) or even their own summary plan description (SPD).
Travis Freeman, president of Four Seasons Financial Education, explains that many qualified plans are designed to permit the use of plan assets for some education programs, and ERISA doesn’t frown on the practice.
One prerequisite is that the program must be anchored on retirement planning, he says. An acceptable source of such funds would be plan forfeitures, he says. This is money left by short-term employees who paid into the 401(k) but left the company before being fully vested. Under ERISA, those payments may be used to pay for fees, 5500 filings or a financial wellness program, he says.
Sean Ciemiewicz, a financial consultant and a principal at Retirement Benefits Group (RBG), notes it is difficult to assess the return on financial wellness spending in hard-dollar terms, so close tracking of expenses is paramount. Even with good tracking, sponsors will find there are many other life factors that can muddle the return on investment calculation.
Employers aren’t totally in the dark, however. The desired outcomes of a financial wellness can be tracked in a limited way through surveys or focus groups. Employers might not be able to filter out all the complicating variables, but they should be able to measure whether employee efficiency improves and whether people are becoming betters users of the 401(k).
Sponsors should set goals such as fewer loans, fewer emergency withdrawals and so forth. Each company can decide its own metrics for measuring success. Ciemiewicz and Freeman urge companies to formally report on results twice a year, and to occasionally do a deeper dive and see where the opportunities remain.
“Education helps to motivate employees. Then, employers must take hold of that motivation to enact change among employees and keep them accountable,” Freeman says. “This entire process is repeated year after year. Education is the most publicized factor. However, education is an event, while wellness is a process. That’s the difference.”