Financial Wellness and Employee Engagement
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Callan’s 16th annual “Defined Contribution (DC) Trends Survey” offers the latest developments on a number of retirement plan topics, including SECURE 2.0 (prior to passage), diversity, equity and inclusion, plan design, governance, legislation, investment management and participant advice. If you’re thinking about implementing a financial wellness program for your employees, the survey also offers key insights into the process, including the following three key components.
Designing and Monitoring a Program
The survey found that the responsibility for designing and monitoring the financial wellness program most often lands on the Human Resource staff’s plate, rather than a governance committee. In addition, unlike most defined contribution plans, financial wellness generally does not fall under the Employee Retirement Income Security Act of 1974. This means employers that add benefits outside the existing legislative or regulatory framework do so at some level of risk. The survey’s authors also suggest that plan sponsors consider how to best monitor and manage these benefits. While the two programs (retirement and financial wellness) may interact, they are typically monitored by separate people or teams, which can lead to efficiency gaps. DC plan fiduciaries may require regular reporting on the financial wellness program in conjunction with their ongoing plan monitoring to ensure both programs are operating optimally.
Prioritizing Needs and Objectives
The survey revealed that the top financial wellness needs were in the areas of savings behaviors and roadblocks to saving, including budgeting and debt management. Nine out of 10 respondents indicated retirement savings was a top financial need (3.9 weighted average rank out of 5). Sixty-three percent highlighted emergency savings needs (2.3) and 56% called out either budgeting (2.0) or debt management (1.8). One-quarter reported offering some sort of incentives to participate in a financial wellness program.
Means of Soliciting Employee Financial Wellness Needs
Internal Survey 41%
Individual Feedback 19%
Focus Group 6%
No Means 25%
Top Financial Needs Identified
Retirement Savings 3.9
Emergency Savings 2.3
Budgeting 2.0
Debt Management 1.8
Healthcare Spending 1.6
Student Loans 1.5
5 = most important. Total ranking is a weighted average score.
Measuring Effectiveness and Determining Success
Respondents prioritized usage, participant feedback or surveys, and return on investment to measure financial wellness program success.
Top Criteria To Gauge Success of Financial Wellness Program
Usage 4.6
Participant Feedback or Surveys 2.5
Return on Investment 1.8
Impact on DC Plan Savings Behaviors 1.8
Increased Engagement 1.6
Cost 1.2
Ease of Administration 1.1
5 = most important. Total ranking is a weighted average score.
Sources/Notes:
Callan’s 2023 “Defined Contribution (DC) Plans Survey” can be viewed at https://tinyurl.com/2p8ty75h. A free registration is required to access the survey.
Callen. (2023). 2023 Defined Contribution Trends Survey. 2023 DC Trends Survey - Callan
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Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC).