A financially secure employee is a happy employee. That seems to be the bottom line of a newly released Workplace Benefits Report from Bank of America Merrill Lynch.
Based on a nationwide survey of more than 1,000 companies of all sizes, the report examines the evolving role of employers when offering financial benefit plans to employees, and in helping American workers achieve financial wellness.
“We see more benefit leaders than ever before acknowledging the need to play a central role in their employees' near- and long-term financial well-being,” said Kevin Crain, senior relationship executive for Bank of America Merrill Lynch.
“This study identified areas where companies are providing their workforces much needed guidance, as well as areas where they understand more can be done to help employees take greater control of their financial success,” he said.
The study found that providing financial education and other resources is not only beneficial to workers but also to their company's bottom line. For instance, employers believe that overall financial wellness leads to a more satisfied (76%), loyal (66%), engaged (65%) and productive (55%) workforce.
“As companies consider ways to optimize employee performance and retention, effective workplace benefits that encourage healthy financial behaviors should be near the top of the list,” said Steve Ulian, head of institutional business development for Bank of America Merrill Lynch.
Providing employees with access to personalized financial advice has become increasingly important, with 70% of employers now offering employees access to one-on-one relationships with financial professionals. The vast majority of employers — 80% — say working one-on-one with a financial professional can help employees improve retirement outcomes.
READINESS STILL LAGS
Nearly half of employers in the study indicated that they provide at least some advice or guidance to workers who are within five years of retirement. But 40% of companies said they need to start offering greater guidance to employees preparing to retire or to improve advice and resources currently in place.
Because many workers are retiring later — either because they can't afford to stop working or because they don't want to — the study found that more than half of companies now offer part-time work options or consulting opportunities for employees nearing or at retirement age. The trend is even more prevalent among large employers, where 63% provide phased-retirement options to retain the intellectual capital of valued employees and to help employees transition into retirement.
Although 40% of employers help their retiring employees understand options related to assets accumulated in their 401(k) plans, only 17% of employers offer assistance with other retirement-related issues and considerations, such as Social Security.
A separate study released by the LIMRA Secure Retirement Institute last week revealed that one of the most valuable tools employers can offer their employees is to translate their retirement savings into projected monthly retirement income.
“Providing an estimate of what their monthly income will be in retirement has been well-received by most U.S. workers,” said Alison Salka, corporate vice president and research director for the LIMRA Secure Retirement Institute.
However, only half of U.S. workers have seen a monthly retirement income projection, according to the nationally representative survey of more than 2,000 American adults.
Another area many employers agree needs greater focus and employee education is the rising cost of health care. The Merrill Lynch study found that more than one-third of employers now provide employees with education about what health care could cost them during retirement, up from 21% in 2012. Among employers who provide at least some education about retiree health care costs, 45% of them believe more needs to be done in this area.
“There are significant opportunities for employers to help fill gaps in employee knowledge and preparation in these important areas of their lives,” Mr. Crain said. “Offering access to more personalized advice and education about saving for retirement and health care costs can have a meaningful impact on a person's long-term financial health.”
But much remains to be done. “Americans aren't saving enough for retirement — plain and simple,” said Jerry Patterson, senior vice president of retirement income strategy at The Principal Financial Group, a major provider of workplace savings plans.
To elevate the success of any retirement plan, Mr. Patterson suggests companies adopt several key automated design features, including automatic enrollment with at least a 6% deferral rate, automatic escalation of at least 1% per year, and a matching contribution formula that requires employees to contribute at a higher rate to capture the full employer match.