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Financial Education for Benefits

What Makes You Think They Have A Clue?

Employee benefits programs have become much more complicated.  They are complicated for Benefits and HR professionals, but employees are truly befuddled.

During the course of a year, there is now an expectation that employees will decide some of the following:
Choose or revisit the contribution level they make to the retirement plan.
Choose or re-up for their medical coverage.
Examine their current retirement account and reallocate investment funds
Decide how much to reduce their salary for a pre-tax spending account
Examine co-pays, coinsurance and deductibles to make certain they have sufficient liquid assets available to pay possible liability
Remember many of the choices and in fact most of the choices made during annual enrollment are locked in for 12 months.

Plus many organizations provide benefits which require regular employee monitoring such as: health spending accounts, high deductible health plans, paid time off banks, medical provider discount networks, multiple 401(k)investment options, health risk assessment incentives, triple tier prescription drug plans, stripped down catastrophic medical coverage, company performance match for retirement savings and retiree medical credits.  A host of new variations on the benefits theme appear constantly.

People are accountable for their own future. Do you really think rank-and-file employees have enough understanding of: gross versus net pay, cash flow, liquid assets, the time value of money and budgets to make the basic benefit choices? Many employees make at least one annual enrollment decision using the eeny meeny miney moe method.  This is for the folks making an election. Many, feeling just not competent to make a decision, are defaulted into benefits or select the default benefit.

We need to change this situation.  It does not help anyone; not the organization providing benefits and not the rank and file employees. Basic financial education should be the first step in providing benefits. Teach people basic money concepts in a neutral environment.  What is net pay? What is cash flow? What is pre tax? What is an asset?

We can do better. Research shows that a basic level of financial understanding makes people comfortable to make choices about life and benefits They are also more satisfied with the benefit program their employer offers. Basic financial understanding means a more productive workforce for the organization and more secure employees..

Posted by Jackie Jackson, November 02, 2007 in Resources.