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June 30, 2011
Surprising Connections Between Physical, Financial Wellness

Health insurance costs continue to rise. And if you’re like most employers, you’re willing to try just about anything to reduce costs – or even just to minimize annual premium increases. One strategy that is receiving more and more emphasis is the wellness program. Although determining an ROI for these programs is elusive, few would argue that healthier employees should result in better claims experience, and better claims experience should ultimately result in lower costs. And that’s not even considering the nonfinancial benefits of a healthy mind and body.

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One roadblock to great health is stress. Maybe you’ve been so focused on your healthcare plans that you haven’t really considered the toll stress is taking on your employees. Keep in mind, those employees who have survived the worst of the recession are likely dealing with a heavier workload than they were before, especially if you had to implement layoffs. Pay cuts or a job loss within the family may also mean an increase in the financial stress employees are feeling.

According to an AP/AOL survey, worry about finances may be a significant contributor to stress. And stress, in turn, may negatively affect our health. While the survey does not show whether the chicken or the egg came first, it does reveal some interesting connections between the level of stress we’re under due to financial matters, and our physical ailments.

For example, the survey showed that among people with high levels of stress from debt, 39% suffer from insomnia or other sleeping problems, 33% from high blood pressure, and 27% from ulcers or other digestive troubles. Compare those figures to people who don’t have high levels of stress from debt: 17% have insomnia or sleep problems, 26% high blood pressure, and 8% trouble with ulcers or other digestive issues.

It would be reasonable to conclude, then, that easing the stress of financial problems could help reign in healthcare costs.

Reasons for counseling calls evolving

Liz Davidson, CEO of Financial Finesse (www.financialfinesse.com) has some strategies that can help. While her company offers targeted employee education for client companies – such as for mergers, changes in benefits, or layoffs – they also offer a more broad-based program that can be considered financial wellness. “When we first started the company, prospects called because they had specific, event-driven needs. They were going public and needed to educate their employees about stock options. Or they merged with another company and needed to educate employees about the new parent company’s benefits. Now, it’s more about giving employees financial education, or financial wellness,” she says.

Targeted financial education might focus on, for example, retirement planning. “There is very widespread recognition that 401(k) deferral rates are not as high as they need to be, and that employees are not on track to retire because they’re not saving enough,” Davidson says. Educating them on the merits of planning for retirement in general, and their specific retirement plan is great – but alone is not enough. “The old school of thought was ‘let’s just focus on retirement education, and that will get the deferral rates up.’ The problem is, if the plan is the best plan ever but I can’t afford to invest any more than I’m investing, or to invest at all, it doesn’t really matter what the match is or how great the funds are.”

That’s why a financial wellness program, which offers a broad range of confidential financial education based upon the needs of your employees, accomplishes more than one goal. First, it improves their financial wellbeing. The by-products include benefits for your company (like increased productivity), and for your benefit plans (like more deferrals into the 401(k) plan and maybe even lower health plan rate increases). “Bringing education to employees that help them better budget and save, helps them reduce their debt so they can free up savings to invest, may lead to the deferral rates going up as a consequence to that,” Davidson says.

“Any company has a range of employees with a range of needs. It runs the gamut from debt problems to estate planning. And there are many employees who are grappling with multiple financial issues, which are all interrelated. So to say ‘We’re only dealing with this one issue’ isn’t really realistic in today’s world,” she says.

Retirement planning coming into focus

Financial Finesse tracks statistics on the calls received (the calls themselves, of course, are strictly confidential). Just a few years ago, in the depths of the recession, callers were primarily concerned with debt issues, Davidson reports. “Retirement planning was just off the radar for so many people,” she says. “There were a lot of people taking loans or hardship withdrawals just to meet current expenses. Many employees were struggling to get by, and retirement planning went by the wayside. We saw a period of time where employees were looking at 401(k)s almost like checking accounts.”

Those days are largely behind us, and in terms of caller concerns, Davidson reports that retirement preparedness tops the list. “The good news is people are starting to focus more on retirement, and are recognizing it as a priority.” The bad news is that the number of those who are prepared for retirement has decreased in the last couple of years. “There were so many people who ended up selling (out of the stock market) at the wrong time, and putting their money into stable value (money market-type) accounts. Because they sold at the wrong time, they locked in a loss, and then didn’t take advantage of the recent run-up because they were out of the market. That’s a big problem.”

“A lot of people have money still sitting on the sidelines. We have talked with companies that have 40%+ of 401(k) assets in stable value funds. It could be disastrous from a financial planning perspective. That’s an area where we’re doing more work, really focusing on helping people see how to effectively allocate their assets. We don’t believe everyone needs to take an aggressive approach, by any means. It’s a personal decision based on your risk tolerance and your time frame and so forth. But understanding the pros and cons of different investment strategies is important, and so is understanding that risk is not just about loss. There’s the risk that you’re not going to save enough.

“True, you can put your money into an account where you’re not going to lose it, but your interest rate is going to be so low that you’re probably not going to beat inflation. So that risk needs to be articulated to employees. Education is the best way to combat the irrationality, just getting employees to understand the dynamics of the market and that there really is no such thing as a riskless investment.”

As with physical wellness, financial wellness can benefit anyone. “You can enroll in and benefit from a physical wellness program if you’re overweight and at risk, or you can participate and benefit from it to maintain your health if you’re already fairly healthy. It’s the same concept with financial wellness. So if the employee is in severe levels of debt, you’re not talking to them about increasing their retirement plan deferral. You’re helping them get through a potential crisis, then rebuild their credit, progress to better financial habits, and ultimately start to save.”

“At the end of the day, if you want to retire, you’ve got to develop a strategy that’s reasonable to get there.”

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