Plan Sponsor Q&A - Q1 2022
Q: We are considering adding a financial wellness program as part of our retirement plan benefit program. Unfortunately there isn’t a lot in the budget to work with right now. Any ideas on how we might approach it?
A: As you probably know, workers are becoming increasingly interested in financial wellness education that can help reduce financial stress and prepare them for economic uncertainty. In fact, a recent survey by Brightplan revealed that when employees ranked employer-sponsored benefits, “financial wellness” was consistently ranked higher than workplace standards like healthcare and vacation time – and was only surpassed by “salary.”
Here are two activities to consider before to launching a financial wellness education program in the workplace:
Conduct an employee survey. Employees should be formally surveyed to get a sense of what they need to feel supported as they continue to return to their pre-pandemic lives. Employees should be specifically asked in which areas of their personal finances they would most value employer support – such as building an emergency savings account or reducing debt.
Quantify your numbers to justify funding the program. Employers should consider quantifying how financial stress impacts their bottom line through factors such as lower productivity, absenteeism or medical costs. They may also want to consider identifying and targeting groups of employees who need the most help and focus initial financial wellness education efforts on them.
Q: Our plan committee is thinking about purchasing fiduciary liability insurance. Is a fidelity bond the same thing as fiduciary liability insurance?
A: The fidelity bond required under ERISA specifically insures a plan against losses due to fraud or dishonesty (e.g., theft) by persons who handle plan funds or property. Fiduciary liability insurance, on the other hand, is an insurance plan that fiduciaries purchase to protect themselves in the event they breach their fiduciary responsibilities with respect to the plan. Please note that courts can hold plan fiduciaries personally liable for losses incurred by a plan as a result of their fiduciary failures. Fiduciary liability insurance — while not required — could be an important financial safety net for plan fiduciaries. Although obtaining ERISA fiduciary insurance is considered prudent, it is not required and does not satisfy the fidelity bonding required by ERISA.
Q: During our recent annual plan review, we were happy to see that the majority of our employees have continued to make contributions to their retirement accounts during the pandemic (and very few took hardship withdrawals). Is this unique to us or was more of a universal trend?
A: Americans continued to save for retirement through defined contribution plans during the first half of 2021 despite ongoing economic stresses brought about by the COVID-19 pandemic, according to ICI’s “Defined Contribution Plan Participants’ Activities, First Half 2021.” The study tracks contributions, withdrawals, and other activity in 401(k) and other DC retirement plans, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans at the end of June 2021. The latest recordkeeper data indicate that plan participants remained committed to saving and investing: a preliminary estimate indicates that only 1.1 percent of DC plan participants stopped contributing to their plans in the first half of 2021. That compares with 2.0 percent in the first half of 2020, and 4.6 percent in the first half of 2009 (another time of financial stress).
In addition, the first half of 2021, 2.8 percent of DC plan participants took withdrawals, the same percentage as in the first half of 2020. Levels of hardship withdrawal activity also were low, with only 1.1 percent of DC plan participants taking hardship withdrawals during the first half of 2021, the same share of participants as in the first half of 2020.