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Do Your Employees Understand Their Financial Benefits?

Karl Holmlund

When employees understand and use many aspects of their financial benefits package, they will be more satisfied, happier and more loyal to the company. And you will get more bang for your buck if more people take advantage of the benefits you are already paying to provide.

The Evolution of 401(k) Participation – And Why That’s Great

The trend is evident: financially savvy employees are participating more than ever in employer 401(k) programs. That’s great for them, and for you. One reason is auto-enrollment, but that’s not the full story.

According to research aggregated by the National Association of Plan Advisors citing data from a recent Fidelity analysis, the 2018 participation rate for non-auto-enrolled 401(k) plans is only 52%. Compare that to the striking difference of 88% participation for auto-enrolled plans.

Furthermore, 91% of employees who are auto-enrolled don’t opt out, and participation among Millennials has increased by 82% over the last 10 years, mostly due to employers adopting auto-enrollment.

The rest of the 401(k) story shows that employers are contributing the highest percentage of pay (5.1%) to their employees’ accounts ever recorded and that, combined with the average 7.1% savings rate by participants, the total savings rate is an impressive 12%.

Now that more employees are participating in their 401(k) are they appropriately invested? A financial wellness solution can provide employees with the information they are yearning for, which funds to select in their company 401(k). By investing appropriately, employees are more likely to reach their retirement goals. A comprehensive Financial Wellness partner delivers technology tools, education and advice to help employees realize the magic of 401(k) savings and how it benefits their future.

Healthy HSA Enrollment Makes the Entire Company Healthier

Do your employees know the savings and tax advantages of a Health Savings Account (HSA)? While the rules applying to enrollment in HSAs can be daunting, your Financial Wellness partner will lay out the complexities in easy-to-understand ways for your employees.

For example, do employees know that their HSA benefits roll over year after year, and that contribution limits for 2020 are going up by $50 for individual and $100 for family coverage? In a report from the Society for Human Resource Management (SHRM), the new IRS limits are spelled out along with reasons why HSAs benefit employees and employers.

The SHRM report reasons that the 2020 contribution limits will help increase the value of HSAs to individuals and families, not only for near-term health savings, but for future health costs including retirement as well.

Data for 2018 HSA Market Statistics and Trends also reflects that employer contributions rose last year while average employee contributions dipped slightly. Effective communications of HSA benefits to employees as part of a Financial Wellness program could improve participation rates. It’s also notable that more organizations are providing opportunities for employees to "earn" employer contributions by participating in wellness activities that appeal to Gen X, Millennial and Gen Z employees who are typically not as focused on health-related benefits.

Why should an employer put all this focus on HSAs and overall employee health? The Public Health Institute cites that every $1.00 spent on a worksite wellness program can result in $3.50 savings in reduced absenteeism and healthcare costs. In addition, the workplace benefits from increased productivity, energy, morale, and better company culture.

Get Employees in the Game with ESPP Investment

Consider your Employee Stock Purchase Plan (ESPP) in the big picture of employee wellness. With a full grasp of ESPP options, employees are more likely to get in the game as part-owner of the company. That vested interest could yield results in the overall bottom line as employees are more concerned with higher productivity and controlling costs.

If they understand the difference between tax-qualified, non-qualified or direct purchase plans and how your company implements an ESPP, the possibility of participation might improve.

Another advantage of investing in an ESPP is that selling the shares to pay for immediate cash needs or to reinvest in other long-term savings is often easier than owning company stock in a 401(k), which can be sold only for other investments in the plan. A good Financial Wellness program provides individual advice on how to prioritize savings vehicles and evaluate the aspects of each.

An effective Financial Wellness partner helps employees understand the value of these benefits through, online tools, seminars, webinars, and one-on-one talks (yes, human advisor calls – a real person). When employees understand the many positive returns of their financial benefits package, the whole company benefits.