Can Your 401(k) Make Your Employees More Productive?

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Retirement Services & Financial Advisors​ - Serving Columbus & Beyond

Submitted by Life, Inc. Retirement Services on May 4th,2015

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If a recent employee retirement survey is an indication, retirement plan sponsors have a tremendous opportunity to significantly improve worker productivity, optimize plan participation while fortifying their liability firewall – all in the name of plan management best practices. A recent employee survey would suggest that, by helping plan participants feel smarter and more confident in their financial decisions, employer-plan sponsors could meet several critical needs.

A March 2015 survey conducted by State Street Global Advisors (SSGA) revealed that the financial stressors have the greatest impact on work quality and productivity. 60 percent of the 1000 employees, age 20 to 69, said they were emotionally stressed and distracted by their financial situation which included the unsettled feeling that they have not done enough to prepare for retirement.

Of course, it wouldn’t take a workplace psychologist to come up with the obvious solution which would be to provide employees with access to resources that could enable them to address their financial concerns and alleviate the stressors that detract from work quality and productivity. Equally important, when employees have greater clarity in their financial situation, they are better able to focus their attention and actions towards their retirement savings and future financial security.

Such was the analysis of the SSGA which went further with recommendations for employers seeking to create a greater sense of financial well-being among their employees. Because the financial demands of many employees extend beyond just retirement savings, it suggests that a more holistic approach is required to address concerns in all aspects of their financial lives. Issues such as health care costs, burdensome debt, and meeting family obligations are all potential roadblocks to retirement readiness.

Why the Focus on Financial Well-Being Matters to Plan Sponsors

In addressing this workplace malady head on plan sponsors would solve for several of the challenges they face as an employer, a plan manager and as a fiduciary.

Achieving productivity gains: Numerous studies have shown that, when companies deliberately focus on the overall financial well-being of their employees, they experience measurable gains in morale, retention, and productivity. Employers, who can effectively remove financial stressors as distractions, can expect greater productivity from their employees which ultimately translates to higher profits.

More effective/efficient plan management: Plan sponsors who allocate sufficient resources towards financial education and investment guidance invariable experience an increase in plan participation and contributions, both of which are critical to achieving optimum cost efficiency. When employees have greater clarity and confidence in their ability to achieve retirement readiness, they have a greater sense of financial well-being.

Greater protection from liabilities: In meeting the first two challenges, plan sponsors are strongly positioned to meet the fiduciary challenge of ensuring all plan participants are provided with the resources to better understand their retirement needs and to able to make sound investment decisions

Setting aside, for the moment, the opportunity to achieve significant gains in productivity and plan cost effectiveness, employer-plan sponsors need to be able to meet their fiduciary requirement of providing a minimal level of education and guidance. Many plan sponsors outsource this requirement to a plan provider or financial advisors who offer minimal resources as part of their service. Larger companies may have the resources in-house to provide a higher level of education and communications.

Since all plan sponsors have to go down this path anyway, it may behoove them to perform the cost-analysis of upgrading the financial education they are required to provide to a level that would overtly demonstrate their concern for their employees’ overall financial well-being. If, on average, 60 percent of your employees are stressed and distracted by personal financial concerns, that very likely presents a very high ceiling for achieving significant gains in morale and productivity.