Providing financial wellness benefits to employees makes good business sense for a couple reasons. Financial stresses like saving for college or retirement can hamper employee productivity, so helping employees take control of their financial wellbeing can help alleviate some of that anxiety.
Providing creative benefits that go beyond 401(k) plans, like student loan repayment or debt management, can differentiate your company and show your employees you care about their lives outside of the workplace. This is especially important for small businesses that must retain top talent in order to remain competitive.
It’s not easy for most companies to recognize the value of providing financial wellness benefits. The challenge is getting employees to enroll in them.
401(k) plans are the most prevalent financial wellness benefit, offered by more than three-quarters of employers, but employee participation has hovered at 50 percent for the past two decades.
Fortunately, there are steps HR and benefits managers can take to encourage more employees to participate. It comes down to education — making employees aware these benefits exist and showing how it would positively impact their financial lives.
Use the 401k workforce adoption as a benchmark
401(k) plans are far from universal, but they are the most popular financial benefit for a few reasons. For one, they offer tax benefits that are unmatched by other financial benefits: employees can contribute with “pretax” dollars, and any matching contributions an employer makes are also tax-free.
While most other financial benefits lack comparable tax benefits, there are a couple bipartisan bills being considered by Congress that would change this.
The Employer Participation in Student Loan Assistance Act would allow employers to contribute up to $5,250 toward employees’ student loans, tax-free. Similarly, the Boost Saving for College Act would enable employers to match up to $1,000 to an employee’s 529 plan, excluded from his or her income.
Another reason why 401(k) plans have become so prevalent is that employees are often enrolled by default. Which brings us to…
Automatically enrolling employees in anything — especially where money is concerned — can be a delicate matter. Aside from 401(k)s, it also shouldn’t be one-size-fits-all in most cases.
However, it would make sense to enroll an employee in a 529 plan when he or she takes parental leave. Or, if an employee has been taking advantage of tuition reimbursement or other educational benefits, he or she could be automatically enrolled in student loan repayment benefits upon graduating.
When automatically enrolling employees in any financial benefits, it’s important to communicate the rationale and benefits to the employee, and to provide a clear way to opt out. However, many of these employees probably would have enrolled in this benefit anyway but lacked the time or awareness about it.
Take every opportunity possible to educate employees about financial benefits
HR and benefits managers need to explain to employees why enrolling in financial benefits is so important. The best way to show the value of financial benefits is to back it up with numbers. Using specific figures that show the “price of procrastination” — for example, showing how compounding interest impacts how much someone saves for retirement over time — can convince employees to take advantage of these benefits now, not later.
If your company has an internal communications system, you can publish “success stories” or case studies that show the positive impact these benefits have had for employees. Another option is to hold informational events such as “lunch and learns,” with free food to incentivize employees to show up.
Provide a financial incentive for enrolling
This doesn’t have to be complicated. For example, a $25 gift card or $100 spot bonus can go a long way in getting employees to participate in voluntary financial benefits.
Understand where your employees are in their financial lives
If you try all these steps and still don’t get the participation levels you’re looking for, it might be time to reevaluate how you’re communicating with employees — especially ones across different generations. Every employee has their own financial priorities that depend on where they are in their lives. For example, perhaps your Baby Boomer employees aren’t signing up for 529 benefits because their priority is saving for retirement. Millennial employees may not be enrolling in 401(k)s since they’re consumed with student debt.
Again, it all comes down education — understanding what keeps your employees up at night when it comes to their finances, and showing how you can help.