A recent article in Fortune titled Has the 401(k) failed discusses how a small but vocal group of advocates think the 401(k) is a relic of a bygone age, what's wrong with the current system and how it can be salvaged. Excellent article.
The article points out several flaws to the current 401K model -- too many people choose not to enroll at all, fees are often obscured, and most of all, among those who do invest, choices can be shockingly bad. A 2008 study by Financial Engines, for instance, showed that 38% of respondents had "worrisome" levels of company stock in their portfolios.
But what I found most interesting was the seemingly unanimous agreement that at a minimum one way to make 401k's better is to increase employee education.
In fact, SHRM's recently released 2009 Employee Benefits Survey Report found:
- Organizations recognize the critical importance of financial and compensation benefits. A financial literacy program benefit debuted on the 2009 survey with 12 percent of surveyed companies offering it. Also, more companies offered a defined contribution retirement plan benefit in 2009 (90 percent) than 2008 (84 percent). Notably, HR professionals reported fewer organizations offering the executive retention bonus benefit in 2009 (11 percent) than 2008 (17 percent).
- Overall, health care and welfare benefits declined slightly in 2009 though more companies are offering mental health coverage benefits in 2009 than 2008. Seventy-five percent of HR professionals said their organizations offered the benefit last year compared to 80 percent this year. Mental health coverage was the only benefit in this category to be offered by more organizations in 2009 than 2008.
A nice summary of the research is here.
It's a great time to be in the financial education business.
A recent poll by HRmarketer.com client LifeCare.com found a majority of workers do not or cannot keep cash reserves for emergencies. LifeCare.com's CEO Peter Burki says:
"The poll's findings are in keeping with general personal finance trends that LifeCare has tracked during the past two years. LifeCare reported that its Call Center is now answering a record number of calls about financial issues -- so many, in fact, that the company's financial call volume has eclipsed its child care call volume. In a three-month period at the beginning of 2009, LifeCare answered about 1,500 financial calls -- or nearly one call every hour-and-a-half, 24 hours a day, seven days a week".
Another HRmarketer client ThriveOn offers corporate financial education in various eLearning and Software-as-a-Service applications and their services are in strong demand these days. Here is a sampling of their financial education videos.
I've been attending SHRM this week and most of the vendors I spoke with who offer financial education benefits say business is booming. One of the better attended sessions was Dave Ramsey's presentation Hope in the Workplace: Kicking Financial Stress Out of Your Office where Mr. Ramsey shared five principles that will change the lives of your team members.
Mr. Ramsey has a new company that aims to educate employees about finances.
The Obama administration is sufficiently concerned about the 401(k) that in its May budget proposal it considered including a clause that would make workers have to opt out rather than opt in to a plan, but it ultimately chose not to do so.
Either way, if you are an HR vendor in the business of financial education, now is the ideal time to increase your marketing to employers.
Labels: 401k participation rates, Employee Benefits, financial education