1) Financial Wellness / Financial Coaching
This isn’t just about helping loyal employees with critical financial skills they should have been taught in grade school (don’t get us started!) – this is also about protecting the viability and culture of your organization. Financial stress can have a significant, quantifiable impact to your bottom line: increasing healthcare costs, decreasing productivity, and restricting the natural workforce lifecycle (i.e. employees retire when they are ready, making room for younger generations).
“Financial Wellness”, in our opinion, goes beyond traditional one-size-fits-all group education, infographics, and online calculators. Truly impactful financial education occurs at the personal level, via a live, unbiased human being, at the exact moment it is needed and relevant to the individual. Having access to a financial coach when a life event happens can not only have a lasting impact on the financial future of that individual and their family, but could also generate a positive ripple effect throughout your organization.
2) HSA Integration with Retirement Plans
Health Savings Accounts (HSAs) continue to build momentum, primarily as a way to take better control of one’s healthcare spending and become a more educated consumer of health services. As many individuals have begun saving more in these accounts than they are spending, the value of an HSA as a retirement savings vehicle is becoming very apparent.
With their ability to provide a triple tax advantage (pre-tax contribution, tax-deferred growth, and tax-free withdrawal), an HSA even has leg-up on 401(k) plans and the like, if used correctly. Of course, because HSAs should only be used for healthcare costs in order to maximize their benefit, employer-sponsored retirement plans will always have their place. Many believe that, assuming HSAs continue to gain momentum and assets continue to grow within them, these accounts will ultimately become a “side car” to our retirement plans and serve as an additional source of retirement income, with the primary purpose of paying for Medicare premiums and other medical expenses in our golden years.
Accordingly, many retirement plan providers are now offering their own HSA solutions (proprietary or through a third-party HSA provider) and integrating them alongside their 401(k) or 403(b) platforms. By doing so, employees can begin better perceiving their HSA as a long-term savings vehicle and not a short-term spending account, as well as manage both investment accounts in one place. When combined with the continued possibility of legislators increasing HSA contribution limits, as well as the gradual realization by employees of the real potential of HSAs, an integration of these accounts with retirement plans is almost an inevitable outcome, and the most progressive employers are already taking action. There is still, however, a significant lack of education around HSAs across employers, employees, and even (surprisingly) health insurance brokers, which will moderate this progression. Nonetheless, we are likley in the very early stages of this evolution with many innovations (and regulations) to come.
3) Student Loan Repayment Programs
By now, we have all have realized that student loan debt is the proverbial monkey on the back of the majority of our younger workforce; and it is stressing them out. So much so, that many employers are starting to look at ways to help their employees tackle this problem head-on, by offering a benefit (and recruitment tool) to help pay it off.
Student loan repayment programs have actually been around for a while now, just in the inconspicuous form of bonuses and incentive programs. But recent technological innovations by companies like Thrive and Vault, as well as proprietary developments by several retirement plan providers, are now helping formalize this as a standalone employer benefit – one that can be offered across an entire workforce or targeted only to specific, individual employees or recruits. Bonuses, matching contributions, and/or employees’ own loan payments can be automated through these programs, helping employees better visualize the “light at the end of the tunnel” and give them more peace of mind.
In addition, these programs can now be integrated with 401(k) and 403(b) plans, allowing employers the ability to allocate their matching contribution towards an employee’s retirement account, student loan, or a combination of both – based on how the employee allocates their own money. As it stands today, though, any employer match made into a retirement plan would still require an employee to also contribute to that same plan. However, in 2018, Abbott Laboratories sent a shockwave through the retirement plan industry when they publicized an IRS Private Letter Ruling (PLR) which allowed them to use student loan payments made by their employees in determining their employer matching contributions made into the 401(k) plan. As a PLR, this is not something currently available to all employers, but it could be an indication of things to come.
With the continued rise of college tuition and an entire generation of debt holders ready to enter the workforce, don’t be surprised if prospective and current employees begin asking about these benefits in short order.
4) Retirement Plan Automation
This may be an “oldie, but goodie” for some employer-sponsored plans (it certainly is for many of our clients!), but there are many plans out there that still haven’t modernized their 401(k) or 403(b) with automatic features – such as automatic enrollment, automatic increase, re-enrollment sweeps, etc. – despite their proven ability to generate significant impacts on the retirement outcomes of employees and the overall health of the plan.
Others have timidly introduced parts of these features in a way that can unknowingly result in creating more harm than good. Because automated features are built to help passive savers (which represent the majority of the population), a “go big or go home” mentality should be taken. Passive savers rarely make active elections and, therefore, are allowing their employer to decide what is best for them. If automatic enrollment is set too low, if auto-increase is not utilized, or if default investments are not age-appropriate, the likelihood of a positive outcome is significantly reduced. The best approach is to nudge employees in the direction we all know has the best chance for success, and let them change direction if they would prefer otherwise.
Automation around the administrative side of retirement plans also continues to be a missing element for many employers. The amount of time, energy, and frustration spent by HR and Payroll teams related to retirement plans is, at times, ridiculous and unfair. However, with the right providers in place, there are several efficiencies that can significantly ease the pain, including: a 360-degree data integration between payroll and plan provider; the automatic force-out process of small, terminated balances; and fully outsourcing the notice delivery and distribution processes.
For solutions, ideas, or just some nerdy chat around any of these topics, please feel free to reach out to us at retirementplans@summitgroup401k.com or 757-499-8300.
