Facing economic uncertainty and market volatility at the onset of COVID-19, employee usage of company financial wellness programs surged, according to a recent survey of retirement plan decisionmakers.
Prudential’s 2020 Plan Sponsor Pulse Survey of nearly 700 retirement plan decisionmakers found that nearly three-quarters (72%) reported the financial wellness programs they offer were in greater demand, with 28% recording a sizable uptick in employee usage.
With financial wellness programs typically providing education and counseling, Prudential suggests that employees were hungry for this mix of trusted financial advice and emergency assistance. “To have employees resoundingly turn to financial wellness resources serves as both confirmation of their value and an opening to build on this strong foundation,” notes Harry Dalessio, head of Institutional Retirement Plan Services at Prudential Retirement.
As the pandemic has evolved, along with personal finances, employers have an opportunity to meet the ongoing and changing needs that are surfacing, says Dalessio. In fact, the survey results indicate that plan sponsors were already thinking along these lines. Although they reported being focused primarily on the immediate health and safety of their employees and the financial impact on the company, more than a quarter say they are planning to enhance their offerings in a variety of ways.
The top five areas they expect to address within their financial wellness programs are:
- improving digital communications with employees (33%);
- expanding the definition of hardship to include disaster relief (31%);
- easing the process for taking out hardship withdrawals (28%);
- adding a new financial wellness program (27%); and
- adding an in-plan retirement income option (25%).
What’s more, just under a quarter (23%) were also considering adding an emergency savings option, expanding employer contributions and changing their fund lineup, including adding stable value as an option. Prudential further observes that those expecting to make no changes were solidly among the minority at 11%.
Financial wellness programs were also found to play a role in calming nerves and mitigating hasty decision-making in reaction to market turbulence, adds Dalessio.
To that end, plan sponsors indicated that financial losses in employee retirement plans and the potential for delayed retirement of employees due to retirement plan leakage were not top of mind at that time—which were consistent with Prudential’s own experience during the same time period, the survey found.
Prudential notes that during the first three quarters of 2020, just 10% of its clients’ plan participants took a hardship withdrawal, a Coronavirus-related distribution or a loan, including a CARES Act loan.
“Having access to financial wellness resources, including education about budgeting, emergency savings, and debt management can help employees consider a range of alternatives rather than simply tapping their retirement plans,” Dalessio emphasizes. “This can deter workers from overreacting during a crisis, which can have a positive, long-term impact on their retirement security.”
The online survey of plan sponsors was conduced from April 22-June 2, 2020. Plan sponsors were qualified to participate if they had a decision-making or recommending role in the plan design, provider selection or investment selection of the DC, DB or NQDC plan the organization offers. In addition, plans had to have $10 million or more in total assets under management.
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