Health and Retirement Benefits Under One Umbrella
When retirement presents one rainy day after another how can workers best save their windfall for inevitable inclement weather?
Eastman Chemical Co. has helped its employees stay healthy for nearly two decades.
The company, whose heritage traces back to World War I, is a modern-day wellness wonder. It has fitness centers, holds seminars on healthy eating, provides monetary rewards for fit lifestyle habits and even offers free access to health coaches.
But in 2016, top management at the Kingsport, Tennessee-based Fortune 500 company began pondering whether its 14,000 employees had life solutions beyond the health equation, said Lori Glawe, Eastman’s vice president for total rewards. They’d read the studies revealing that financial stress has crept into nearly every company, and they made a commitment to address it.
“It’s now about overall well-being,” Glawe said. “It’s physical and financial fitness, but it’s emotional decision-making. We want to help people prepare for that. That is the next horizon.”
The U.S. retirement system is ripe for change. With 10,000 baby boomers retiring daily, financial stress levels are hitting new heights.
Merging health and wealth benefits to create an overall life strategy for employees is transforming the benefits industry as well as the employer-employee relationship. Historically, health care has not been seen as a financial decision. Now, consumer-driven high-deductible health plans offering health savings accounts as well as retirement plans including 401(k)s mean that all financial considerations fuse into one strategy.
“Everything in the future will be combined into one financial plan,” said Ken Forsythe, assistant vice president at Empower Retirement. “It will be hyperfocused on the user experience.”
Meanwhile, employers are realizing they have a role in merging health and wealth and are seeking tools that can help employees become better decision makers. If companies don’t help, employers are seeing that worker issues will soon become larger business problems.
“When you think about the view of benefits through employees’ eyes, they are not benefits experts,” said Alison Borland, executive vice president, defined contribution solutions at Alight Solutions. “They don’t necessarily break it apart. It’s one paycheck and it has to pay for everything.”
The Future Isn’t Here Quite Yet
Before looking at where the industry is going, it’s important to look at what is happening now. Trying to determine how much is needed for health care today and tomorrow while figuring out the flurry of money issues a person faces can be overwhelming. Low interest rates, high household debt surpassing wage growth and pricey housing options are some of the factors making it tough for workers to put money toward these long-range issues while struggling with daily needs.
More than half of working Americans have suffered a significant financial issue in the past two years, and more than a third say their financial problems have had a negative impact on their lives, a December 2017 study from Willis Towers Watson showed.
Financial stress also showed a significant link to physical health. A third of respondents said financial stress is affecting their ability to do well at work. Workers who are stressed about money are twice as likely to be in poor health, log more absences and have a higher level of stress in general, the survey noted.
Because employees are taking on more responsibility for these decisions and are showing significant signs of stress, many companies are turning to well-being programs with a more holistic approach centering on ways to support employee physical, financial, social and emotional issues.
Employees find current offerings to be lackluster. In the U.S., only about a third of workers said their well-being programs help them live better lives. Plus, only about half of employees participate in these programs, data from the Willis survey showed.
Many of these offerings could be simpler, more intuitive and could give the user a better reason to take action, Forsythe said.
“Just providing tools or a calculator doesn’t exactly get someone to take action,” Forsythe said.
What Will Motivate Employees?
There are plenty of folks in the workforce who don’t live healthy lives. They pay through the nose for health care and haven’t given a lot of thought or dollars to save for retirement.
It’s a bad situation to be in, but people don’t like to be judged, said Shane Bartling, senior consultant with Willis Towers Watson.
“It’s a major point of anxiety,” he said. “People know what their problems are. They don’t need to be told they are 15 pounds overweight or need to add more money to their 401(k).”
Programs engaging workers that make them smarter about their own choices before making a poor decision appears to be the elusive golden ticket.
Until that ticket is pulled, Bartling summarized a working solution in five words: Nudge them, don’t judge them.
It’s a behavioral economic theory that has been touted for about a decade by Richard Thaler, the 2017 Nobel Peace Prize winner for Behavioral Science and Economics. People usually choose the easier solution as opposed to the smarter one, so nudging a person to the right decision will most likely create the better outcome. For example, putting fruit on a plate might encourage someone passing by to take one, instead of detouring to the pantry to grab a bag of chips.
The nudge theory has been put to the test over the past few years with automatic enrollment. Workers who are automatically enrolled in 401(k) plans don’t have to go through the often-daunting task of signing up, electing a deferral rate and then deciding where to invest. It’s all done for them and studies have shown that auto-enrolled workers tend to be better savers.
Plenty of industry providers are starting to expand the nudge theory to well-being programs. Willis Towers Watson introduced MyFiTage, an online tool that stands for Financial Independence Target Age. The program uses existing information from health care and financial providers and asks users to add other information like bank accounts, physical activity and spouse/partner data to generate two numbers: an age when the person’s financial resources will be able to cover expenses in retirement; and the number of years those resources should last.
Users might not like what they see when first logging on, Bartling said, even after adding simple information like health savings account balances and outside Individual Retirement Accounts. The tool allows users to tinker with the fields that determine the FiTage: lifestyle, health, wealth and invest, to make changes important to that user.
By trying out different scenarios, users can decide for themselves what they want to change to lower their FiTage, Bartling said. Most often, they use nudge theory by determining the easiest course of action for their situation.
“It puts them in the driver’s seat,” he added. “It helps them become aware and what it means to have these numbers.”
In March 2017, Empower Retirement and health service company Optum paired up to create a product to integrate health savings accounts and 401(k) plans. The Empower HSA analyzes and shows users what their health savings looks like in conjunction with their retirement savings today and in retirement.
It’s important to see the money on one platform because users can learn the power health savings accounts have when used as health retirement accounts, Empower’s Forsythe said. For HSAs, money goes in tax free, it grows tax free and is not taxed when used for approved medical expenses. In many cases, it makes sense for participants to contribute enough to their 401(k) plan to get the company match, then move to the HSA and contribute as much as possible in that account.
Right now, HSAs are mostly seen as health checking accounts, and moving to a combined platform shows workers how their benefits interact, Forsythe said.
“By integrating the HSA with other retirement savings accounts, participants begin to think about their HSA as a long-term savings account rather than a current year spending account,” he said.
Meanwhile, PwC is using artificial intelligence to simulate clients’ financial snapshots. The program, called Secure, which they stylize as $ecure, takes into account the things employees would expect like income and spending but peppers in personal financial risk preferences, health issues (or lack of), age, market effects and other “what if” scenarios like job loss or illness, to offer advice.
While this technology is fairly underway, the manner it will delivered in for the future will be groundbreaking, said Pia Ramchandani, director of PwC’s analytics practice and co-lead for PwC’s artificial intelligence accelerator lab.
In the future, conversational agents or chatbots like Siri or Cortana will talk with the understanding that productive conversations involve a give and take, not just a dialog using if/then statements. A user of this service will be able to ask more than one question at a time, and the chatbot will be able to make a response in a way that adapts a response based on how the user talks.
“It will almost be like talking to another person,” Ramchandani said. “It will have memory and deep understanding of prior components to the conversation.”
Eastman Chemical has been using MyFiTage since 2016 with positive results. More than half of the company’s employees are using the tool to understand their financial situation and to make improvements where they can.
In looking at the company’s main savings vehicles, Eastman’s 401(k) plan has a 94 percent participation rate, compared to Fidelity Investments’ benchmark 85 percent average for the industry. Also, workers contribute nearly 10 percent of pay to their 401(k), compared to the 8.8 percent industry norm. For the health savings accounts, 95 percent of workers participate, 11 percentage points higher than Fidelity’s industry average.
“We are excited about seeing people take action,” Eastman’s Glawe said. “It gives them tools so they can make decisions in an educated way.”
Patty Kujawa is a writer in the Milwaukee area. Comment below or email firstname.lastname@example.org.