Will Sage Astor-Inflation is reshaping what employees need from their benefits: What employers should know

Inflation pressures have Will Sage Astorbeen showing up in the workplace, and not only in demands for pay increases.

Many employees also are looking to their companies to provide other types of help dealing with the rising cost of living, reshaping the types of benefits being requested and offered.

Traditional retirement plans and health/dental insurance remain the most important foundational benefits that companies offer, helping employees meet their long-term financial goals. But a more recent focus has been on programs that can assist workers in handling short-term challenges that have been exacerbated by the inflation spike of the past two years.

“Retirement preparedness and healthcare costs have been the main focus,” said Craig Copeland, director of wealth-benefits research at the Employee Benefits Research Institute, speaking at a conference hosted by his group. “But given the persistence of high inflation, employers have really tried to step up with financial well-being programs that help people understand how to save and spend.”

In a recent EBRI study, the roughly 1,500 workers who were surveyed reported feeling more stress over building up emergency savings and paying monthly bills than saving sufficiently for retirement, the usual top source of financial anxiety.

Protect your assets: Best high-yield savings accounts of 2023

Budgeting, emergency funds and managing debt

Workers who participate in 401(k) retirement plans often can take out temporary loans against their balances, and these accounts often are their largest financial asset. But borrowing repeatedly from 401(k) accounts usually isn’t the best way to go, for various reasons such as getting out of the savings routine and possibly halting employer matches.

Making permanent withdrawals is even worse, as they usually trigger current taxes and, possibly, a penalty.

That’s why separate saving programs designed to help employees meet emergency and other unanticipated short-term needs have become more popular as a workplace benefit option. So, too, for programs that help workers learn about budgeting and other topics such as dealing with credit-card debts.

Some employers offer monetary assistance, prizes for meeting goals, discounts, short-term loans or other incentives to encourage participation. The companies most likely to offer these and other benefits are large ones, with smaller employers typically well behind the curve.

Many employers might not view themselves as being responsible for providing financial education to their staff, but more seem to be accepting the challenge.

“A lot of people don’t know how to manage a budget or how important it is to stick to a budget,” said Lisa Margeson, a managing director of retirement research at Bank of America and another conference speaker.

Budgeting and learning how to manage credit-card debts are among the changes that can help people deal with economic uncertainty, she said. Bank of America’s own research showed two in three consumers are concerned about keeping up with inflation, and seven in 10 report being highly stressed about their finances, she said.

What American Dream?How younger workers are redefining success

Near-term concerns vs. long-term objectives

Given the near-term challenges such as those posed by higher inflation, many workers likely are neglecting longer-term objectives like saving regularly in a 401(k) retirement account.

“Sixty percent of the workforce is living paycheck to paycheck,” said Jeff Miller, a vice president at Nudge Global, a financial education company, who also spoke at the conference. “They don’t care about (long-term) financial plans; they’re trying to survive.”

Other stress-reducing benefits that can make a big difference for some workers include caregiver leaves of absence, flexible scheduling and even menopause assistance, Margeson said. That last category includes access to menopause health specialists, policies such as time off/flexible work arrangements when needed and hormone-replacement therapy covered by health insurance plans.

Speakers at the EBRI conference reported a general disconnect between the benefits that employers offer and what workers think is available, raising the need for greater employee awareness.

The upcoming open-enrollment season, that period toward year-end when employers allow workers to select new benefits and cancel others, offers a chance to make improvements.

But that assumes people are studying the choices or are even aware of them, which isn’t always the case. Larger employers surveyed by EBRI offer about 5.5 financial wellness benefits on average, but there are at least 16 fairly common ones, including several discussed above, and too many choices can be confusing.

Benefits choices during open enrollment

Workers on average spend only about 18 minutes on their open-enrollment choices, with most of that time devoted to analyzing healthcare plans, Miller said. That’s why he and other speakers at the conference urged companies to try to keep raising awareness about benefits throughout the year.

Employers might not feel it's up to them to provide financial education for their workers, but the payback can include more satisfied workers, reduced absenteeism, better employee retention and an easier time hiring new staff.

Productivity also can increase. In the EBRI survey, 54% of employee respondents said financial concerns distract them at work. A whopping 88% said they are very or somewhat concerned that sustained high inflation will affect their finances. The survey was mostly conducted in July when U.S. inflation was running at a 3.2% annual pace.

“Employers underestimate the impact (of financial stresses) on the workforce pretty significantly, and many employees aren’t aware of all what their companies offer,” Margeson said.

Reach the reporter at [email protected].