Financial wellness programs offered to employees have become a mainstay at many firms, but while they certainly have the potential to help with managing finances, their effect on employees' financial health remains to be seen, according to news reports.
Around half of companies with more than 500 employees offered financial wellness programs, according to a survey released in September by the Employee Benefit Research Institute (EBRI), the Wall Street Journal writes. While that’s essentially flat compared to the year prior, a further 20% were implementing such programs in 2019, up from 12% the previous year, and 29% expressed interest, according to the paper.
Employers are offering services such as payroll advances, assistance with student debt repayment and emergency savings, primarily through payroll deductions, the Journal writes. Some firms also match contributions, while a few offer cash grants, according to the paper.
But the Journal notes that most financial wellness offerings are no replacement for a salary boost. Moreover, while such services can give a burst of liquidity, they may also lead to workers saving less for retirement, the paper writes. Some companies, however, are going a step further and requiring that employees participating in the financial wellness programs also undergo training in financial literacy, according to the Journal.
Meanwhile, financial wellness services often come with caveats, the paper writes. For example, payroll advance apps, which allow workers to withdraw necessary funds from money earned on hours already worked, have no tax consequences, since they don’t go toward pretax retirement funds, according to the Journal. But some firms offer advances as small loans, typically of a couple of thousand dollars, to be paid back via payroll deductions — and these carry interest rates from 6% to 36%, depending on the employee’s credit score, the paper writes.
Emergency savings funds, meanwhile, allow quick access to cash, and some firms even match contributions, according to the Journal. But much depends on how such funds are managed: for example, prepaid cards may come with fees such as for ATM withdrawals or even checking balances, the paper writes.
Some employers auto-enroll their employees in their financial wellness programs, which Catherine Harvey, senior policy adviser with the AARP Public Policy Institute, says has already led to a boost in 401(k) participation, according to the Journal. But depending on an employee’s age, they may not need all the options — older employees, for example, likely don’t need assistance with student loans, the paper writes.
And the overall impact of such programs remains to be seen, according to the Journal.
“It is going to take a few years for us to get all of the data from these experiments,” says Lori Lucas, president and CEO of EBRI, according to the paper. “But the key here is that employers and policy makers recognize we need to start doing more. We expect to see continued innovation in this area as we start learning more about what works and what doesn’t.”
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