Financial wellness programs can be a win-win for DC plans

The number of employers that offer — or are considering offering — financial wellness programs for their workers is exploding. According to the consulting firm Aon Hewitt, as of early 2017, 58% of employers included at least one financial wellness offering in their benefit suite, and by the end of 2018, that percentage is expected to top 80%.1

Financial wellness solutions are as varied as the organizations that implement them. They can be as simple as online or mobile tools, as involved as contests and incentives, and as personal as one-on-one coaching. The topics addressed are wide-ranging as well, including budgeting and debt management; selecting a college and financing education; assessing insurance needs; and making money last in retirement.

While more organizations already offer financial wellness assistance beyond the retirement plan, about half are still working through their overall strategy.2 That spells an excellent opportunity for you to help your plan sponsor clients determine an approach suited to their organizations, and to lend your expertise in delivering programs to employees.

Education and wellness, working together

Traditional education methods can continue to be a good tool for many defined contribution (DC) plans to communicate about the plan, but some employers are discovering a connection with new trends such as financial wellness. First, it’s important to know the distinction.

What is financial wellness?

While there’s no single definition, financial wellness has evolved from a measure of financial literacy to a more well-rounded notion of financial security and peace of mind.3 When employees have their personal finances under control, they’re healthier, less distracted, and more productive on the job.

What is employee education?

Traditionally, many employers’ participant education programs have focused on plan features and saving for retirement. These programs are typically designed to provide participants with information on making decisions about plan contributions, allocations, and investment elections that would be consistent with their personal objectives, needs, and situation. In recent years, many employers have begun using communication techniques tested in participant education models to apply them beyond the 401(k) plan.

The case for financial wellness

Many plan sponsors say they offer assistance with their employees’ financial well-being because, as Aon Hewitt notes, “it’s the right thing to do,”4 but also because it’s good business. Financial wellness programs can help:

  • Increase employee productivity. A recent study revealed that about half of all workers say they spend three or more hours a week dealing with personal financial woes, and 47% say that either they’ve occasionally missed work or their on-the-job productivity has been diminished by financial worries.5 Indeed, only 37% of Americans have enough money set aside to cover an unexpected $1,000 expense, so their anxieties appear to be grounded in reality.6 Helping employees reduce financial anxieties can help keep them focused on the job.
  • Contain healthcare costs. Financial worries are one of the top two stressors for American adults, affecting 62% of workers,7 and stress leads to a litany of health issues. About 43% of adults suffer headaches, high blood pressure, heart problems, and many other ailments as a result of stress. It’s estimated that 90% of all trips to the doctor can be chalked up to stress-related complaints.8 Stress-induced health problems hit employers in the pocketbook, too. According to one estimate, stress may cost an employer with 10,000 workers as much as $660,000 a year in additional healthcare costs.9
  • Improve retirement plan metrics. Financially stressed employees, on average, save less for retirement and are more inclined to take a loan from their employer-sponsored plan. Helping employees contend with financial barriers to savings could increase retirement plan participation and contribution rates; reduce loans and hardship withdrawals; and minimize auto enrollment opt-outs.
  • Boost retirement readiness. Of all workers reporting financial stress, 62% say they’re postponing retirement because of inadequate savings,10 ratcheting up healthcare and labor costs for employers. Women tend to be even less retirement-ready than men because of lower compensation and savings rates — and longer lifespans. But a recent study showed that financial wellness and literacy programs are effective ways to help women get on track.11

Planning an approach

The most effective financial wellness programs are tailored to the needs of particular employee populations and the unique goals of the organization.

Work with your plan sponsors to analyze employee data. Check absenteeism, productivity measures, benefits usage, retirement contribution rates, loan activity, and retirement ages. Break down the numbers by demographic groups, and you can more easily determine the likely sources of financial stress — to better target the program elements you design. That said, a few financial stressors are so common across demographic groups, it may make sense to serve those needs first:

  • Student loans and credit card debt. Four in 10 millennials are making payments on student loans, and of those, 83% say those payments are significantly or moderately undercutting their ability to meet other financial commitments.12 But millennials aren’t the only ones paying student loans. Fully 72% of workers across all age groups have education debt.13 Plus, 70% of those workers who report being under financial stress consistently carry credit card balances and 67% struggle to pay bills each month. Helping workers with debt consolidation and reduction strategies almost certainly will be needed.
  • Building emergency savings. The number one financial concern among financially stressed employees is having enough money set aside to cover unexpected expenses.14 Helping employees develop strategies for budgeting and establishing an emergency fund could prevent workers from raiding their retirement accounts, enable them to contribute more, and put them on track for retirement readiness.
  • Healthcare expenses. Fully 45% of all workers are somewhat or not at all confident that they’ll have enough money to cover their healthcare needs in retirement.15 Certainly, with the popularity of high-deductible plans and health savings accounts (HSAs), the connection between health and wealth is becoming clear to many plan sponsors. Assisting employees with appropriate insurance plan selections and educating them about the long-term benefits of saving in HSAs could help set employees’ minds at ease.

One action item that could reap positive outcomes

Plan sponsors that may see the benefit of extending the plan’s reach into financial wellness — but may wonder how to get started — should take that first step: Schedule time with a financial advisor or consultant to assess what would be most helpful for their specific employee population. In addition to setting goals and defining the right program, the advisor can help track employees’ progress or suggest a system of sharing success stories to promote the value of the program throughout the employee population.

The bottom line

To keep their benefits competitive — and to drive bottom-line results for the retirement plan and the business — plan sponsors should consider starting or expanding financial wellness programs. As an advisor, you’re well positioned to help them design programs that are right for their organizations and provide the personal assistance their employees want and need.


1 Aon Hewitt, 2017 Hot Topics in Retirement and Financial Wellbeing.

2 Aon Hewitt, 2017 Hot Topics in Retirement and Financial Wellbeing.

3 PricewaterhouseCoopers LLP (PwC), Special Report: Financial Wellness and the Bottom Line, September 2017.

4 Aon Hewitt, 2017 Hot Topics in Retirement and Financial Wellbeing.

5 PricewaterhouseCoopers LLP (PwC), 2017 Employee Financial Wellness Survey.

6 Sheyna Steiner, “Survey: How Americans Contend with Unexpected Expenses,”, January 6, 2016.

7 American Psychological Association, Stress in America: The State of Our Nation, November 1, 2017.

8 WebMD, “The Effects of Stress on Your Body,” reviewed by Jennifer Robinson, MD, December 10, 2017.

9 PricewaterhouseCoopers LLP (PwC), Special Report: Financial Wellness and the Bottom Line, September 2017.

10 PricewaterhouseCoopers LLP (PwC), pecial Report: Financial Wellness and the Bottom Line, September 2017.

11 Drew M. Anderson and J. Michael Collins, “Can Knowledge Empower Women to Save More for Retirement?” Center for Retirement Research at Boston College, September 2017.

12 PricewaterhouseCoopers LLP (PwC), 2017 Employee Financial Wellness Survey.

13 John Manganaro, “Will Student Debt Repayment Support Become Table Stakes?” Plan Sponsor, May 1, 2018.

14 PricewaterhouseCoopers LLP (PwC), Special Report: Financial Wellness and the Bottom Line, September 2017.

15 Lisa Greenwald, Craig Copeland, and Jack VanDerhei, “The 2017 Retirement Confidence Survey — Many Workers Lack Retirement Confidence and Feel Stressed About Retirement Preparations,” EBRI Issue Brief, no. 431 (Employee Benefit Research Institute, March 21, 2017).

The views expressed represent the Manager's assessment of the market environment as of June 2018, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.


Investing involves risk, including the possible loss of principal.

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