A hidden tool for funding financial wellness programs

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Offering employee benefits above and beyond the standard retirement plan or an array of insurance coverage is becoming a necessary tactic in both recruiting and retaining top talent. Organizations have found it beneficial to create a well-rounded benefits program that truly focuses on individualized needs, including but not limited to financial wellness initiatives. A study produced by the Consumer Financial Protection Bureau found that financial wellness programs generate a return up to three times the initial investment, as employees who understand their own financial picture are less stressed and more focused on the job.

But financial wellness programs come at a cost to the employer that can be difficult to stomach when cash flow is tied up in operational expenses or other financial commitments. Fortunately, finding the funds for creating and implementing a financial wellness program may be as simple as looking to current benefit coffers.

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When the general budget doesn’t display any wiggle room for a new employee benefit, a solution can be found within the Employee Retirement Income Security Act. Under the Act, retirement plans that meet a certain set of requirements are afforded specific protections, including those established by an employer with the implicit role of providing benefits directly to employees. According to Rob LaBreche, CEO of Enrich Financial Wellness, “A number of qualified plans are specifically structured to fall within the guidelines of ERISA, which ultimately creates a layer of protection for both employees and employers.”

While beneficial in helping employees feel comfortable contributing to their own retirement savings, ERISA-protected plans safeguard employers from some financial liabilities should an issue arise that involves the courts.

Having benefits available to employees that fall under ERISA lays the groundwork for rolling out new, employee-focused initiatives, including the often overlooked financial wellness program. LaBreche explains, “Plans under the protection of ERISA often have excess funds which are acceptable to use for rolling out and maintaining employee education programs, including financial wellness.”

While total excess plan assets vary from organization to organization, the use of these funds from an ERISA-covered benefit is often more cost-effective than tapping into the general budget.

How are plan assets generated?
Many employers and benefit providers may nod their head at the use of plan assets for financial wellness programs, but the practical application of this strategy may be challenging without understanding where plan assets originate. Vice President of Enrich Financial Wellness Kris Alban explains, “Excess funds within a plan can come in a variety of forms, the most prevalent being forfeited assets. Employees who leave an employer after a short period of time, before being fully vested, forego some employer-paid contributions that can be used to pay for financial wellness benefits.”

In addition to forfeited funds, plan revenue credits or ERISA funds generated by excess revenue within the plan can be credited back to an ERISA plan directly from the recordkeeper. These excess credits are also acceptable to use in providing additional ERISA benefits like financial wellness education.

Also see:5 ways to determine which private benefit exchange is right for you.”

When financial wellness programs are used in tandem with employer-sponsored retirement plans, both employees and employers reap powerful benefits. Financial wellness programs can be structured to provide real-world education on a variety of topics, including retirement savings and investment strategies, debt management and major purchase planning, budgeting tips, and setting aside for emergencies. The holistic approach of a financial wellness program boosts employee confidence in their personal financial management approach and ultimately leads to greater success — and less distraction — on the job. If the cost of implementing a financial wellness program seems to put the initiative out of reach, look into current ERISA-covered benefits for the necessary capital.

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