Research has long shown that financial wellbeing is critical to promoting job satisfaction, loyalty, productivity, and engagement. According to the results of Buck’s 2020 Financial Wellbeing and Voluntary Benefits survey completed before the pandemic hit, it’s clear that employers are deeply aware of the financial stress most Americans struggle with every day. This was cited as one of the top motivators for their investment in financial wellbeing programs.
Now, faced with the economic impact of COVID-19, organizations are looking to see if their benefits programs can support critical emerging employee needs, and if not, whether they can fill gaps by offering new or expanded benefits.
So what support can employers provide?
As with most benefits, an effective financial wellbeing program can’t simply be applied “off the shelf.” That’s why employers agree that new and evolving voluntary benefits help provide the flexibility and choice needed to overcome personal finance challenges
But how can organizations help employees protect against unexpected expenses and balance short-term financial obligations with long-term wealth planning? Here are three key areas to consider when building a financial wellbeing strategy.
1. Help manage higher healthcare costs
A Kaiser Family Foundation Health Tracking Poll conducted in February found that 65 percent of respondents are very or somewhat worried about being able to afford unexpected medical bills. COVID-19 has made the situation more precarious for many people. The pandemic has forced them to delay elective surgeries, preventative care, and other necessary healthcare. These delays increase the risk of higher chronic conditions and hospitalizations. Many analysts project premiums may increase in 2021 by anywhere from 4 to 40 percent because of the outbreak.
With more cost-shifting and a very possible hike in demand for healthcare services, employees face increased financial pressure. Supplemental medical can play a key role in “de-risking” these higher healthcare costs. Hospital indemnity plans can offset out-of-pocket costs for increased hospitalizations. Plans like critical illness and health accident play a key role in helping employees prepare for unexpected medical expenses.
2. Provide support for short-term financial stressors
A 2019 Federal Reserve survey found almost 40% of American adults wouldn’t be able to cover a $400 emergency with cash, savings or a credit-card charge that they could quickly pay off. The problem has only been exacerbated by the pandemic as unemployment climbs to record highs.
Employers can support their people by providing an array of services like financial coaching programs, budgeting tools, bill pay services, guidance for establishing emergency funds, and professional credit counselling. In the short run, earned pay access programs that allow employees to tap earned pay in advance of payroll, or a short-term payroll loan, can help ease the cash flow burden created by loss of income.
These can give employees the help they need to weather their financial storm.
3. Offer guidance and support for employees struggling with student debt
The Coronavirus Stimulus plan (CARES Act) has opened up new opportunities to help support employees with student loan repayment.
Section 2206 removes a major barrier for employers who have been planning to offer a student loan repayment benefit by treating employer contributions in an identical pre-tax manner as retirement contributions and tuition reimbursement benefits. While the Stimulus Plan enacts a pre-tax treatment through the end of this year, we do still expect Congress to permanently enact IRS tax code changes in the very near future. Section 3513 also allowed borrowers to put their student loan payments on hold for the next six months and no interest will accrue during this period on the outstanding loan balance(s).
For employees struggling to make payments against their student loan debt during this crisis, this benefit provides significant relief for those individuals and their families. It also presents a great opportunity for you to offer new guidance and support around this critical issue.
Voluntary benefits help stabilize employee finances—and provide peace of mind.
Poor short-term choices can have a lasting impact on financial health, including being able to retire. Moving employees from financial instability to stability and, ultimately, to enhanced financial peace of mind, requires providing better choices.
Employers have been looking to financial wellbeing solutions to aid employees not only with retirement savings but reducing student loan debt, increasing emergency savings, improving budgeting, and more.
New and evolving voluntary benefits provide financial flexibility to help overcome employees’ personal finance challenges. Today, these programs are needed more than ever.
To download a copy of the Executive Summary of the report, click here.