Guest column: More than a 401(k) 

July 8, 2021

After their health and safety, finances were a top concern for individuals and families during the pandemic. Job insecurity, market instability, the financial implications related to health concerns, and the realization that they were drastically underprepared for an emergency kept many people awake at night.

An employee financial wellness survey released by PwC in January found 63% of employees said their financial stress had increased since the pandemic started. This was especially true for Millennial and Gen Z employees. But while the pandemic may have increased financial concerns for some, it simply shined a light on the ongoing concerns for many.

Multiple studies conducted over the past few years had already concluded most Americans would struggle to come up with $500 for an unexpected cost. The pandemic was the ultimate unexpected occurrence, prompting people to re-evaluate their financial situations and how to better prepare for the future.

For employers, the financial stability of their employees is not just a payroll issue. Financial stress spills over to the workplace in the form of decreased productivity and increased absenteeism.

It can also impact recruitment and retention efforts. This is reflected in the PwC study, which asked employees if they would be attracted to another company if they felt it cared more about their financial well-being than their current employer.

Of the employees who said their financial stress increased during the pandemic, a whopping 72% agreed with the statement. Nearly 60% of employees whose financial situations were not impacted due to the pandemic also agreed with the statement.

Financial wellness programs, therefore, have become an increasingly important employee recruitment and retention tool. These “next generation” benefits packages address overall financial wellness by teaching employees how to manage debt, save for emergencies, and prepare for the future through a mix of technology and personalized guidance, without requiring additional time or resources from the employer.

They also provide comprehensive products, ranging from retirement accounts to insurance plans and health savings accounts. Some popular options for financial wellness programs include:

  • Retirement accounts. Common types include traditional 401(k) accounts, SEP IRAs, or simple IRAs. Eligibility for these accounts may vary based on your company’s employee headcount and individual employee earnings. Other differences include withdrawal penalties, deferral limitations, and federal filing requirements for the employer, so consult a trusted advisor to make sure you are setting up the right plan for your company.

  • Health savings accounts. These are long-term savings accounts specifically for health care costs that are paired with low premium, high deductible insurance plans. Contributions are not taxed, earn interest, and can roll over from year to year, enabling employees to build a nest egg for medical expenses.

  • Personal financial fitness tools. The most effective financial wellness benefits packages combine personalized, professional advice with technology. Technology offerings give employees a full view of their finances and help them build financial confidence. Employees can use one tool to access their retirement account, track emergency savings, create personalized budgets, and manage debt, empowering them to take control of their financial future. Employees can set personal goals, use automatic transfers to save money and manage debt, and build new financial habits with guidance and encouragement from financial experts — no employer participation necessary.

The pandemic proved no one is immune to emergencies, and employers can play a significant role in helping their employees prepare for the unexpected. Companies who embrace this opportunity are likely to get a leg up on employee recruitment and retention, while helping their employees become financially confident.

Chris Wolf is the northern valley market president at Alerus, a diversified financial services company headquartered in Grand Forks, N.D.