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4 ways employers can lessen the severity of the financial burdens ahead

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Everyone has been enveloped by the health and economic crises caused by the global COVID-19 pandemic — and employees caught in the crosshairs need help. Many people are still struggling to stay afloat while maintaining productivity, caring for their families and holding onto some semblance of well-being.

As employees experience financial hardship, they naturally look to immediate changes that can increase take-home pay. Unfortunately, this leads to reductions in contributions to benefit plans like 401(k)s and HSAs, which can have significant consequences. Failing to save enough can create financial exposure that employees may be unprepared to handle, which is critical as healthcare expenses are predicted to rise.

Read more: 35 companies that boosted their employee benefits amid COVID-19

The trend in reduced savings is not limited to 2020 coverage; this mindset is already impacting employee decisions for 2021 enrollment. In fact, a major national employer that recently completed open enrollment noted the impact on spending account elections was significant. Total healthcare FSA contributions have dropped by over 25% with only 70% of participants continuing coverage into next year, and total dependent care FSA contributions dropped by over 55% with only 43% of participants continuing their coverage into next year.

This mirrors what we’re seeing with mid-year changes, and the worry is that the trend will continue as more benefit elections are made. Through our research and work with clients, we’re finding that employers are considering new programs, but they’re even more likely to expand or remarket current offerings like spending accounts.

Here are four ways employers can optimize the benefits experience for their people:

Expand HSA offerings

One downside to HSAs is that participants can only access funds that have accumulated through pay cycles to date. Seeding HSAs or providing employees the option to access future contributions they’ll make throughout the year eliminates this obstacle, gives them more control over their finances, and enables them to receive care when they need it. It also encourages increased enrollment in HDHPs by removing the risk of first dollar exposure.

Make FSAs more flexible

Many employers across a broad swath of industries answered the call for COVID-19 help, but some declined optional relief primarily because of the administrative burdens and capacity to support. Allowing mid-year election changes without a Qualified Status Change provides significant relief to employees as they try to maximize their benefits in a fluid economy. Also, it may be worth reconsidering some of the underutilized options that were already available before the pandemic, including halting contributions to dependent care FSAs in case that benefit cannot be maximized.

Reimagine your communications

The pandemic aggravated major issues that have always existed when it comes to HSAs and FSAs — the lack of awareness of the advantages and general misunderstanding of how they work. By fully integrating your benefits administration and spending accounts into a single system, employees can easily find, access and navigate their benefits offerings and enrollment resources. Personalized messages and calls-to-action can also be surfaced to employees at the right times so they can increase contributions or make other changes at any point of the year.

Align with your RTW strategy

While spending accounts have always been an important part of the total rewards package, they’ve taken on greater importance due to the changing nature of work and how the pandemic has affected the productivity of employees with numerous commitments. It comes down to helping employees identify and utilize the right resources so they can be successful wherever they’re working. This is especially true for working parents, who could leverage dependent care FSAs for completely new uses, such as remote learning support and oversight.

This year provides a unique opportunity for employers to reset their relationship with the employees and help them prepare for future events. Business recovery and growth is unlikely if the talent pool is distracted, disengaged or disappearing from the workforce, but employers with a robust spending account strategy will be better equipped to bolster employee savings and support other needs in 2021.
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