Financial Wellness At Work: Info, Education and Advice

The money worries of employees don’t stop during work hours, and of course financial stress distracts from the job. Wise business owners offer financial wellness programming in the form of information, education and advice. Even small businesses see productivity boosts as they tune into ways to help employees with their financial plans. Providing a retirement plan, like a 401k is a further way to support employees on the path to financial security. Read on for ideas about incorporating financial wellness into the business day, as well as for pointers about doing so while also being mindful of potential fiduciary risks.

Building Confidence and Financial Know-How

Providing access to financial information and education on the job, as well as sponsoring a retirement plan are important ways that business owners can make a meaningful difference in the lives of employees, while also improving the bottom line. At Paychex Mickey Maxwell shares these points on why financial wellness programs in the workplace are a win for both employees and employers: 

• Financial well-being has become increasingly complex for today’s workforce. Between persistent inflation, mounting debt levels, and cost-of-living increases that outpace wage growth, many employees find themselves wrestling with daily financial stress. Healthcare costs keep climbing, housing remains expensive, and everyday expenses stretch budgets even thinner.

• Financial stress is a silent productivity killer in many workplaces. A financial wellness program can help alleviate these pressures, allowing employees to focus more on their work and less on their financial worries.

• The Employee Benefit Research Institute (EBRI) found that half of small employers already offer financial wellness initiatives, with another 28% implementing them. This shows financial well-being isn’t just personal, it’s a business priority that benefits both employees and your bottom line….

• When employees feel financially secure, they’re more likely to stay with your company longer, take advantage of the benefits you’re already offering, and approach their work with less distraction — factors that can all impact the business significantly.

Ideally, financial wellness programming in the workplace should enable employees to “feel more confident and in control of their financial situation.” Information and workshops tailored to employee needs and interests might include budgeting basics, obtaining a mortgage, managing credit and debt, as well as saving and investing.

Sponsoring A 401k Plan

Providing employees with the opportunity to participate in a well run retirement plan, such as a 401k plan, is among the most tangible ways employers can support their long-term financial well-being. In addition to helping employees build up their savings, most retirement plans also include information, education and even advice to maximize participation. According to Plan Sponsor for example, retirement plan participants 

“who receive investment advice through a managed account or who engage with online participant education and tools saved at a rate 29% higher than nonusers and had twice the average account balance. The more participants use such resources, the higher their average savings rate.”

Employees at different life stages tend to need different types of information and education in tandem with the retirement plan. For example, those beginning their careers may need help building savings habits and maximizing their opportunities with the 401k, while those approaching retirement may need support planning for decumulation. 

In addition to offering personalized educational opportunities, an employer sponsored plan must provide clear and timely information to participants about the plan itself. In fact, as fiduciaries under the high standards of the Employee Retirement Income Security Act (ERISA), retirement plan sponsors are obligated by the Department of Labor (DOL) to ensure that employees receive clear and timely communications about the retirement plan.  An effective Summary Plan Description (SPD) is among the critical documents on the DOL’s must list for participants, and this must be “a plain language explanation of the plan….” The DOL has obligated retirement plan sponsors to mitigate cybersecurity threats and provides specific Online Security Tips to use in educating participants and beneficiaries. 

Education Vs Advice? Managing Fiduciary Risks

Providing retirement plan participants with both education and advice can meaningfully impact their retirement savings decisions. However, as Plan Sponsor’s Beth Braverman explains, sponsors must “be mindful of the difference between investment education and fiduciary advice, as this directly determines their legal liability under the Employee Retirement Income Security Act. Misinterpreting this boundary could increase exposure to lawsuits or prompt prohibited transactions violations.” Here is guidance for plan sponsors related to understanding the legal difference between education and advice related to ERISA retirement plans:

• General information or concepts to help participants make their own choices or understand their plans fall under education. 

• Specific decision-making recommendations about investment funds or actions tailored to the participant and provided over time for a fee could be subject to the DOL’s five-part test for what is investment advice, established in 1975.

• Under ERISA, a provider that gets paid for advice or makes discretionary decisions about a participant’s funds is a fiduciary. If a provider gives advice, such as recommending specific investments or encouraging rollovers, they are responsible for the prudence of that advice and must act as a fiduciary. 

• Even if a plan sponsor hires a third party to provide education, rather than advice, the selection and monitoring of that provider is still a fiduciary act that requires prudence on the part of the sponsor.

• Even if educational materials are provided by a vendor, plan sponsors are still responsible for ensuring they are accurate and compliant.

Complete ERISA Protection Bundles for Retirement Plan Sponsors

It’s essential that ERISA plan sponsors understand that they can face investigations and lawsuits, at any time, alleging that they have made mistakes vis a vis their fiduciary obligations to the plan. Even if nothing has been done wrong, defense against ERISA claims is costly and disruptive, averaging about $600 per hour. 

Keep in mind that an ERISA fidelity bond protects the retirement plan from acts of fraud or theft, but it does not protect the plan sponsor in the face of oversights. Plan sponsors can be held personally liable for errors or alleged breaches in how the plan is run, and that liability cannot be handed off to a third party, even when you use a pension professional or TPA. That is what fiduciary liability insurance (FLI) is for: it covers your legal defense costs and penalties.

There is an additional risk. The Department of Labor treats maintaining a cybersecurity response plan for an ERISA retirement plan as a fiduciary duty, so a data breach can quickly escalate into a fiduciary breach. 

To help retirement plan sponsors, Colonial Surety Company bundles three essential ERISA coverages in one package: the required bond to protect the plan, fiduciary liability insurance to protect you, and $50k of complimentary cyber liability insurance to protect both the plan and your business.

Only Colonial Surety Company solves the complex puzzle of ERISA compliance and protection by putting all three essential coverages into one seamless, affordable bundle for retirement plan sponsors:

1. ERISA Fidelity Bond: Fulfills your federal mandate to protect plan funds from dishonesty. (Colonial Surety is a direct, Treasury-Listed bond writer).
2. Fiduciary Liability Insurance (FLI): Shields your personal assets, covering up to $1,000,000 in legal defense costs and penalties for administrative errors or oversight omissions.
3. Complimentary Cyber Liability Insurance: Provides $50k of vital protection for the plan and company against regulatory actions following a data breach and directly addresses the DOL’s response plan recommendations.

Protect your retirement plan, your business, and your personal assets in one smart move: bundle your ERISA Bond with Fiduciary and Cyber Liability Insurance at Colonial Surety Company. 

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