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A Master Financial Plan

January 22, 2009
Related Topics: Retirement/Pensions, Featured Article, Compensation
Despite being laid off by Weyerhaeuser in November, Nancy Blum is confident about her ability to retire comfortably in a few years. At 49, she has made maximum contributions to the company’s 401(k) plan since the day it was first offered in 1986. She also pays the maximum into her individual retirement account every year and is a participant in Weyerhaeuser’s defined-benefit plan.

    Blum, who worked in the IT department at the Federal Way, Washington-based forest products company, says she believes that she is in good shape, despite what she hopes will be a short stint out of the workforce. And that’s because she attended every one of Weyerhaeuser’s financial planning seminars.

    On average, Blum estimates that over the past few years she has attended a session every quarter, whether it was a webcast or two-day seminar. "I did it from the day it started," she says. "I think knowledge is power."

    Not only did the financial education sessions leave Blum thinking she has control over her retirement, but she also has no hard feelings against her former employer of 30 years despite being laid off. "They are just going through some trying times," she says. "It was a great company to work for."

    In the midst of the recession, a growing number of firms are following in Weyerhaeuser’s footsteps by launching tools and educational seminars for employees to help them with overall financial planning.

    Companies offering employees basic informational sessions on their retirement savings plans is nothing new. But with the recession, many employers realize that offering just retirement savings education and setting their 401(k) plans on autopilot might not be enough to get employees on track to retire on time, experts say.

"Given the current economic situation, employers realize that employees have a heightened appreciation for this kind of financial education."
—Dallas Salisbury, president,
Employee Benefit Research Institute

    "This is beginning to pop up on employers’ radar screens," says David Wray, president of the Profit Sharing/401(k) Council of America.

    Now more than ever before, employees appreciate it if employers help them with overall financial planning, from dealing with credit issues to paying for college, says Dallas Salisbury, president of the Employee Benefit Research Institute in Washington.

    "Given the current economic situation, employers realize that employees have a heightened appreciation of this kind of financial education," he says.

    To accommodate employer demand, 401(k) plan providers are expanding their offerings to include more holistic financial planning support. In August, Fidelity Investments unveiled a new online portal for employees at Hopkinton, Massachusetts-based technology company EMC Corp., which allows them to view all of the benefits they have from the company and model their financial future based on their profiles.

    Over the last few months MassMutual has expanded its retirement savings education seminars and tools to include more aspects of financial planning, covering such topics as saving for college, budgeting and debt consolidation, says Jill O’Brien, assistant vice president of retirement education at MassMutual’s retirement services division.

    "Our clients are telling us that they are hearing the need for this from participants and financial advisors," O’Brien says. "Employees want help with their entire financial future."

    Companies that are providing only education on their 401(k) plans are missing the point, experts say. "If you do holistic financial planning, you have got employees who are making decisions throughout their career with a full view of what it’s going to cost them to retire," says Andy Landis, a life and retirement planning manager with Weyerhaeuser.

The Weyerhaeuser way
Weyerhaeuser offers an array of financial seminars, ranging from a 15-minute online tutorial about 401(k) plans to a 2½-day seminar about preparing for retirement.

    The company, which budgeted a little less than $300,000 in 2008 on these programs, believes its return on investment is evident in the ongoing demand for the seminars and the positive feedback employees give, Landis says.

    Weyerhaeuser employees now better understand "where they are financially and aren’t just moving from crisis to crisis," Landis says. "They have a greater appreciation for the benefits we offer."

    There is a huge waiting list for Landis’ 2½-day seminar, "Healthy, Wealthy and Wise," which targets employees approaching retirement. In this seminar, experts are brought in to talk not just about the financial issues employees need to think about when retiring, but also about the life choices they need to consider, Landis says.

    The company brings back a panel of recent retirees from the company to speak at the sessions, which take place monthly. At a recent session, one couple spoke about their dream of retiring in Hawaii, recalls Susan Wagner, a former director of HR at Weyerhaeuser who was laid off in December. "They talked about how they went there and realized that a lot of people their age were selling their homes," she says. "That’s because the medical care wasn’t there."

Not only did the financial education sessions leave Blum thinking she has control over her retirement, but she also has no hard feelings against her former employer of 30 years despite being laid off. "They are just going through some trying times. It was a great company to work for."
—Nancy Blum,
former Weyerhaeuser employee

    Now Wagner and her husband are making sure that when he retires, they choose a place to live with good medical care, she says.

    Weyerhaeuser also offers half-day and full-day sessions on investing basics and benefits at the company.

    Landis makes sure to offer webcasts to address timely financial topics. For example: Over the past few months, as the company was anticipating some restructuring as a result of selling part of its business to International Paper, Landis conducted a webinar about severance packages. "The effect was to calm a jittery atmosphere by pointing out what benefits you would have if you were laid off," Landis says. The session focused on topics employees need to think about with regard to their medical and retirement benefits.

    Blum, the Weyerhaeuser employee, says that having the webcast materials to review was helpful when she was laid off weeks after the seminar.

    "The original information on severance that we had received from the company was minimal," Blum says. "But the presentation really went into things like how being laid off affected our 401(k) investments, our medical benefits and all of that."

An online approach
    At EMC, executives wanted to be sure that the tech-savvy workforce was taking full advantage not only of its 401(k) plan, but also all of the company’s benefits in a way that would help them be on track for saving enough for retirement, says Ed Golitko, senior director of HR.

    "Part of my rationale comes from the fact that I am a certified financial planner and I am always cognizant of what it takes to achieve retirement goals," he says. "We wanted to help employees save money in other areas as well."

    Golitko and his team worked closely with executives at Fidelity Investments to develop WealthLink, an intranet site for its 20,000 U.S. employees. The first time employees visit the site, they are asked to fill out a 12-question "wealth assessment," in which they provide their financial profile. The site then offers the employees customized educational materials about benefits and information they should know that relate to their profile, says Adam Stavisky, senior vice president at Fidelity Investments.

    The site offers a modeling tool where employees can plug in different scenarios and see how they can optimize the total amount of money they have invested through various EMC benefits, such as its flexible spending accounts, 401(k) or employee stock option purchase plan.

Those employees using the tolls have a better grasp of "where they are financially and aren't just moving from crisis to crisis."
—Andy Landis, life and retirement planning manager, Weyerhaeuser

    For example, if the employee has children, the tool might advise the worker to put more money in the dependent care savings accounts instead of maxing out the employee stock option purchase plan.

    "This tool makes sure that the employee’s money is going that much further," Stavisky says.

    Within the first three months of WealthLink’s debut, 25 percent of EMC’s U.S. workforce had registered for the site, with the average time on the site being 12 minutes.

    Next year, EMC will gauge employee satisfaction with the tool through its annual survey. The company also is discussing making the tool available to employees abroad, with the U.K. and Ireland as likely next steps, Golitko says.

    Eventually EMC would like to enable employees to aggregate all of their outside accounts on the site so that when they visit WealthLink, they can view their entire financial profile, Golitko says.

Making the investment
    While Golitko won’t comment on how much the company has spent on WealthLink, he does acknowledge that it was a significant investment.

    And spending money on these kinds of financial education programs is not on most companies’ list of priorities right now, observ­ers say.

    "We are seeing a steady increase in these kinds of tools," Stavisky says, noting that Fidelity has met with two large employers about WealthLink in the past year. "But companies are very focused right now on cash- and expense-management issues."

    A lot of employers won’t even pay for the record keeping of their 401(k) plans, let alone this level of well-rounded financial planning, says Don Stone, president of Plan Sponsor Advisors, a Chicago-based 401(k) consultant.

    "Maybe that will change, because I really do believe we are going to have a genuine crisis in terms of people’s ability to retire," he says.

    Companies that are wrestling with whether to invest in holistic financial planning need to reframe the question, says Ted Benna, who is known as the founder of the first 401(k) plan and is COO of Malvern Benefits Corp., a 401(k) plan administrator.

    "The question might not be: Can you afford it?" he says. "The question might be: Can you afford not to do this?"

Workforce Management, January 19, 2009, p. 31-35 -- Subscribe Now!

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