Know Thy Workforce

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In the coming months we will start a series on the blog called “What’s the Point?” which will discuss the “Whys” behind employee benefits. To get your brain thinking in that direction I want you to answer a question. Do you know your workforce?

No, I’m not asking if you recognize Bob from accounting, I’m asking if you know and understand where your employees are in their personal journey with their careers and money? As our understanding of how employee benefits programs work we are beginning to realize that this is not a one size fits all. Jeff, your 25-year-old new hire, does not need the same things that Brenda, your 45-year-old mid-career mother of 3, does. Both of them have drastically different questions and needs than Mark the 65 year-old who dreams of spending more time with his grandkids. Providing benefits that are actually viewed as benefits, that actually attract and retain good employees is a practice of providing benefits and education that are relevant and valuable to them. The only way to do that is to Know thy Workforce.

By this point you are probably saying, “Caleb, how do you expect me to know 100+ employees?” That is a great question, but it’s not what I’m saying. Think about it this way; chances are you have 3 basic groups of employees on your team. You have those in the first 10-15 years of their working life, from here on out, let’s call them Kimmies. Then you have Dougs, those 16-35 years into their careers and lastly Bobs, 5 years or less from retirement. Click here to read what Jamie Kertis said on this same topic from a plan design perspective. What you need to understand from the right brain perspective is that Kimmies are not attracted by hearing, “we have a great 401(k) Plan” because inside they are saying, “um, can someone tell me how I’m supposed to pay off this student loan?” Dougs don’t usually get pumped about learning how to pay down student debt, but if someone could show him how to fund college for his children, that would be valuable! Bobs are wondering what this transition looks like? He thinks, “I got them through college, I saved for my retirement, now is it enough, and what steps should I take to get ready for retirement. The theme you should be grasping is that “GOOD” benefits packages should add value to your team and that starts by knowing where they are.

Trust me when I say, offering are 401(k) or health care plan does not make you special. I don’t mean to downplay the sacrifice businesses make to offer these, they are expensive and time consuming, but talent is looking for more. So, how do you do this, how do you add value to all these different groups?

1) Look at the statistics: Knowing your demographics will help you understand if you have more Kimmies, Dougs, or Bobs working for you.  Also, anonymous surveys about topics of interest are a great way to find out what your team needs without them feeling like their privacy was compromised.

2)  Give them a Resource: I am not saying, nor am I expecting, you to be the resource on all these subject. With our focus being on 401(k) plans, many of our clients have us build custom education plans around what their employees need. In those cases, we act as the resource to those participants on personal financial questions, not just the robot suits that tell them how a 401k works. Have a question about student loans? I can help. How about paying off debt or budgeting? I got that covered, too. You are not the resource but you show your team how much you care by hiring someone that can help them!

3)  Listen:  You may be surprised what your team is telling you if you just open your eyes and ears? Are your employees asking for more overtime? Do you have low participation rates in your 401(k)?  Are your claims on the health plan increasing? Are applicants asking if you provide benefits that you don’t? Evidence is staggering that employers who listen AND RESPOND have an incredible impact on morale. Adversely, those who don’t listen can destroy any motivation.

Knowing your workforce is important. It makes them feel appreciated and at the end of the day, you may be offering benefits that they don’t really want or need.  A bit of research and strategically worded questions will allow your company to connect, attract, and retain good talent, by adding value through your benefits plan.

Caleb BagwellCaleb Bagwell/Employee Education Specialist
John Maxwell Certified Leadership Coach
Grinkmeyer Leonard Financial
Toll-Free: 866.695.5162 / Office: 205.970.9088 
1950 Stonegate Drive / Suite 275 / Birmingham, AL 35242
Contact Caleb

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Securities and advisory services offered through Commonwealth Financial Network, Member www.FINRA.org/www.SIPC.org, a Registered Investment Adviser.  This communication strictly intended for individuals residing in the states of AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.
 

 

Impact of Poor Financial Wellness onYour 401(k) Plan

Impact-of-Poor-Financial-Wellness-onYour-401(k)-PlanGoogle “financial stress and health” and about 10,100,000 results are returned in 0.33 seconds; there are articles that detail how to recognize it, how to cope with it, and how to avoid it altogether. Despite all of these helpful tips, there are still a large number of working Americans faced with the ill effects of financial stress.  In the 2016 PricewaterhouseCooper’s Employee Financial Wellness Survey, it is reported that 52% of employees are stressed about their finances and that the stress impacts their health, relationships at home, productivity and attendance at work. Additionally, this financial stress can be a factor in whether or not your workforce is actively deferring into the 401(k) plan. As we know, low deferrals and low participation can be 401(k) plan killers.

A Downward Spiral

401(k) plans are set up to benefit the general population of employees and annual compliance testing (ADP/ACP) is designed to capture whether or not the plan is doing just that.  In short, there is a set amount, captured in a percentage, that the highly compensated employee (HCE) group, defined as an owner or someone who made over $120,000 in 2015, can defer over and above what the non highly compensated employee (NHCE) group defers. As in any mathematical average calculation, a zero drags down the average.  Now that I have given you the background, let’s look at why this is important.  If you have a financially stressed workforce who is not deferring into the plan, then there is a good chance that your HCE group cannot fully take advantage of it.  What we have seen happen in this situation is that the C-level executives who typically make up the HCE plan become disillusioned and stop promoting it.  Then without managerial support for the plan, the NHCE group typically comprised of rank-and-file workforce loses interest too.  Under that scenario, deferral percentages and participation are dragged even lower.  Soon the plan finds itself in a nasty downward spiral of lower and lower participation and deferral percentages which then leads to more financial stress for your people preparing for retirement. You can see where I’m going with this.

Plug the Leak

Another troubling statistic that is being driven by poor financial wellness is plan leakage.  Plan leakage is money that comes out of the plan prior to retirement either through loans or hardship withdrawals.  The 2016 PricewaterhouseCoopers Employee Financial Wellness Survey pointed out that almost 25% of all employees have already taken money out of their retirement accounts and 43% think that they likely will need money from their retirement accounts to pay non-retirement related expenses in the next year. While 401(k) loans may seem attractive because “you are paying yourself back”, what many participants fail to realize is that the money they withdraw as a loan is out of their account and therefore out of the market.  This means the amount of money taken out for the loan will not benefit from the potential gains in the market while is it out of the account.  Additionally, there are fines and taxes associated with defaulting on a loan which can occur if the participant leaves your company before the loan is paid off in full.

What Can You Do?

There are many ways to tackle the problem of low deferrals and low participation; including changing your 401(k) plan design to include a richer match formula to incentivize employees to act, lowering eligibility requirements to allow people to enter the plan sooner, or adding an automatic enrollment feature. These solutions address the end result, not the cause of the problem.  In order to truly improve the financial wellness of your valued people, we believe you have to address the root causes – lack of budgeting, lack of confidence, and lack of urgency.  To address these broader financial topics, employee education needs to not only address the hows of participating in the 401(k) plan, but the whys as well.  For some great ideas on addressing employee education needs, check out Caleb Bagwell’s blog at: Motivated Monday

Although the idea of fostering financial wellness at your company level may seem daunting, this is a great opportunity for you to build more loyal and productive people by addressing their financial needs.  As reported in the 14th Annual U.S. Employee Benefit Trends Study conducted by MetLife, 71%of employees consider work to be the foundation of their financial safety net.  Additionally, 62% of employees agree that they are relying on workplace benefits to help them achieve financial security. Even more telling, 50% of employees strongly agree that their benefits at work help them worry less about unexpected health and financial issues.  As a plan sponsor, you have an amazing ability to positively impact the lives of the people who you value as employees.  Let us help you design an employee benefits plan that can help address financial stress and build a stronger relationship with your workforce.

calebCaleb Bagwell/Employee Education Specialist
John Maxwell Certified Leadership Coach
Grinkmeyer Leonard Financial
Toll-Free: 866.695.5162 / Office: 205.970.9088 
1950 Stonegate Drive / Suite 275 / Birmingham, AL 35242
Contact Caleb

Follow Caleb on LinkedIn

Follow Caleb’s Blog

Securities and advisory services offered through Commonwealth Financial Network, Member www.FINRA.org/www.SIPC.org, a Registered Investment Adviser.  This communication strictly intended for individuals residing in the states of AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.

Why Participants aren’t using their 401(k)s?

Why-Participants-aren't-using-their-401(k)s

If you are a Plan Sponsor, Owner, CFO, or HR Pro have you ever stopped to wonder why participants don’t use the 401(k) you so diligently work to provide? Even if you have great participation rates, there are always “those few” who never enroll, or your participation rates are low despite plan design efforts like matching. This begs the question, why don’t we worry about this more?

Imagine you have an employee who was offered health care through your company yet he declined. He did not have insurance through another employer or a spouse; he just didn’t “trust” the system or thought he couldn’t afford the change in take home pay. How would you react? Most likely, you would sit that employee down and thoroughly discuss the risk involved in trying to be self-insured. This is so important that the government requires your company to provide insurance for your employees due to the future financial risk. However, when it comes to the

401(k)s we seem to be less concerned when an employee turns down that benefit. To fully understand this, I believe we have to uncover what is at the heart of the issue by asking three self-reflective questions: 1) do we truly believe that employees who do not participate in the 401(k) plan do you not want the benefit? 2) are we concerned they do not understand the benefit? and 3) if the answer to 1) is no and the answer to 2) is yes, then what are we doing about it?

I believe if we get to the core of the matter, low participation rates stem from the following equation: 25% lack of knowledge of how the 401(k) works as a benefit and 75% lack of belief that they can get their personal financial situation in order to afford to participate in the 401(k). Not participating is not an act of defiance or stupidity, rather it is a cry for help on managing personal finances. If we care at all about actual employee outcomes in retirement, not just the checkbox required by the DOL, we have to address this.

Financial wellness has been a hot topic for the last few months and you may have seen my post on financially stressed employees http://motivatedmonday.grinkmeyerleonard.com/2016/05/26/5-signs-that-your-employees-are-financially-stressed/ .  Education programs built around the minutia of details on how 401(k)s work is not going to cut it. We have to start meeting the workforce where they are and discussing the three following areas as well as traditional 401(k) education.

1) Budgeting: I know what you’re thinking right now, “Caleb, no one uses a budget.” To which I respond, “that is not entirely true but I get your point.” Budgeting can be used as a way to raise awareness of where your money goes. I do not expect everyone in your company to start to follow a budget but unless you try to create a budget, you will not know if you can or can’t afford to participate in the 401(k). Offering budgeting classes or simply working with your employees to change fundamental beliefs about budgeting can enable employees to begin to move toward participation. To change this mindset means employees must develop an understanding that budgeting is not a restrictive tool but a planning tool and that it paints a pretty clear picture of what is prioritized.

2) Debt management: I get some pushback on this one from time to time as companies don’t want to seem too big brother-ish, but the fact is the average American household is spending more than 15% of their gross income on debt other than their housing payment. Can you imagine a workforce that could save 15% for retirement and not change their monthly budget at all? That is what getting rid of debt can do for a family. Putting together an education program designed to address the elephant in the room- that 96% of your workforce has too much consumer debt – shows that you care about employees’ security. Allowing them the opportunity to build a plan to eliminate that debt is also a great stress reliever.

3) Short term planning: retirement planning and 401(k) education is commonly associated with a long-term plan. While this type of planning is essential, helping your employees address common short-term goals and situations can have an incredible impact on their long-term plans. Techniques like having an emergency fund, preparing for expected and unexpected expenses, and addressing expectations which will most likely occur before retirement can prevent your employees from being derailed by common financial pitfalls.

The truth is, considering the thousands of employees I have spoken to in the last eight years, I have yet to meet one who said, “Oh gee, Caleb I didn’t know I was supposed to be using my 401(k).” Is there a fundamental flaw in our 401(k) education programs that reflects a belief that if employees just know more about the program and employers just keep enrolling, our employees will be convinced to use it? Your 401(k) is expensive and takes a lot to manage but it is a tremendous benefit to your workforce. One final question, if we can’t help employees reach the point where they feel they can actually use their plans; then what are we really providing?

 

calebCaleb Bagwell/Employee Education Specialist
John Maxwell Certified Leadership Coach
Grinkmeyer Leonard Financial
Toll-Free: 866.695.5162 / Office: 205.970.9088 
1950 Stonegate Drive / Suite 275 / Birmingham, AL 35242
Contact Caleb

Follow Caleb on LinkedIn

Follow Caleb’s Blog

 

 

Securities and advisory services offered through Commonwealth Financial Network, Member www.FINRA.org/www.SIPC.org, a Registered Investment Adviser.  This communication strictly intended for individuals residing in the states of AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.

Just a different point of view; Left Brain, Right Brain

leftbrainrightbrain-jamieDoes the thought of reading your plan document make your skin crawl or excite you for all of the information it contains at your fingertips?  Would you rather look a diagram of how to build your daughter’s play kitchen or read the written instructions (in all 5 languages thank you)?  Questions like these are often used to help you identify if you are left brain dominant or right brain dominant.  Traditionally, is has been thought that if you identify with loving to read manuals, following the instructions, and diving into the details then you are left brain dominant; whereas if you respond strongly to art and images, want to be left alone to do your own thing, and value the big picture over the details then you are right brain.  Here are some questions that Caleb Bagwell and I answered that will further illustrate the differences in the dominate brains.  Can you guess what we are?

As a birthday present, your friend bought you one of the latest kitchen gadgets on the market – apparently, it can slice, dice, and make juice at the same time. The only problem is, you have no idea how the darn thing works. What do you do?

Jamie: This could go a couple of ways.  The first thing that I’d do is get online and look-up the instruction manual.  If the manual could not be located, it would promptly be returned or thrown out the window!

Caleb: This one is easy, just start pressing buttons! Seriously, the box told me all the stuff that it did and so trial and error will be all I need to figure out the correct combination of buttons or knobs to get things going!

If you could have 3 hours to yourself to go do whatever you liked, what would you do?

Jamie: Well, I have 2 young children, so I would like to think that I would lay out by the pool and read a good book, but since I have a hard time relaxing until the house is clean, I’d probably end up cleaning.

Jamie: Totally depends on the weather.  If it is sunny that I would be outside on a jog or grilling something tasty.  If it is rainy that it is definitely a movie/nap opportunity, with PIZZA.

How would you describe the neatness of your desk?

Jamie: Everything has its place and even though it may not be as neat as I would like, I know my system and how to find things.

Caleb: Perfect Chaos, but really it’s more like LIFO.  Things go in stacks and depending on when I was working on what project tells me how far down the stack to look for it.  Once a coworker cleaned me desk for me and I had anxiety attack! How was I supposed to find anything!

Would you rather draw someone a map or tell them how to get where they are going?

Jamie: Draw a map or rather give them the address so they can plug it into their GSP.

Caleb: Actually I’m pretty bad with direction and worse at drawing.  I would say use your GPS your holding one in your hand!

Before you take a stand on an issue, do you gather all of the facts or go with your gut right away?

Jamie: Definitely gather all of the facts; it is important to me to know why I am making the decision that I am making.

Caleb: Depends on the outcome resulting in my conviction.  If we are taking a stand on whether the crunch wrap supreme or beefy crunch burrito is better I am ready now, but if we are taking a stand that will affect others I would probably want someone who is an expert on the subject to help me with the details.

How quickly can you tell if you like someone?

Jamie: Not very.  I am usually pretty cautious when it comes to forging new relationships.

 Caleb: Seconds.  Seriously but that’s kind of an unfair questions because I tend to like everyone until they prove me wrong.

You may be asking yourself “why this is important in the context of 401(k) plans?”  What it comes down to is that traditionally retirement plan education has appealed to predominately the analytical, left brain by doling out a bunch of numbers and figures that tend to overwhelm, confuse, and, frankly, bore the people who you are trying to appeal to.  We are aiming to change the norm by not ignoring the details and the numbers, but rather by incorporating the emotional, creative right brain to help the left brain process the information.  In fact, recent research has shown that the brain performs better when both sides are involved, especially when completing tasks associated with mathematics (American Psychological Association, April 11, 2014) like determining how much to defer into a 401(k) plan.

That’s right Jamie, I have to remind myself sometimes that many people enjoy the details but the fact is people need to know “Why” they are making decision.  Helping them find the “Why” behind their retirement savings make the processing of the details possible.  They need to understand they are not saving for a number they are saving for trip to Disney with the grandkids!  Spouting out number at a group of your employees is not connecting with them, helping them channel their creativity and  use it to paint their retirement picture bridges that gap.

caleb

 

Caleb Bagwell/Employee Education Specialist
John Maxwell Certified Leadership Coach
Grinkmeyer Leonard Financial
Toll-Free: 866.695.5162 / Office: 205.970.9088 
1950 Stonegate Drive / Suite 275 / Birmingham, AL 35242

Contact Caleb

Follow Caleb on LinkedIn

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Knowledge is Power

Teaching people about 401(k)s has taught me many things, but above all it has taught me that education/training at work has to change!

For decades now onsite training has drifted into a check box or a CYA, pardon my acronymial language.  We have shifted from being concerned about outcomes and are now more concerned about staying in compliance.  Here are some interesting tips on how to engage your employees and deliver more impactful training.

How to Make Mandatory Trainings Bearable Infographic

 

calebCaleb Bagwell/Employee Education Specialist
John Maxwell Certified Leadership Coach
Grinkmeyer Leonard Financial
Toll-Free: 866.695.5162 / Office: 205.970.9088 
1950 Stonegate Drive / Suite 275 / Birmingham, AL 35242
Contact Caleb

Follow Caleb on LinkedIn

Follow Caleb’s Blog