Value of financial wellness programs on display during pandemic, new study finds

When faced with economic uncertainty and market volatility at the onset of the COVID-19 pandemic, employees flocked to company financial wellness programs—financial resources and experts they knew were at the ready to utilize immediately.

In a Prudential survey of nearly 700 retirement plan decision makers in May, nearly three-quarters (72%) reported the financial wellness programs they offer were in greater demand, with 28% recording a sizable uptick in employee usage. With financial wellness programs typically providing education and counseling, Prudential’s 2020 Plan Sponsor Pulse Survey: Navigating COVID-19 showed that employees were hungry for this mix of trusted financial advice and emergency assistance.

“To have employees resoundingly turn to financial wellness resources serves as both confirmation of their value and an opening to build on this strong foundation,” said Harry Dalessio, head of Institutional Retirement Plan Services, Prudential Retirement. “As the pandemic has evolved, so have personal finances. Employers have an opportunity to meet the ongoing and changing needs that are surfacing.”

Survey results indicate that plan sponsors were already thinking along these lines. Although they reported being focused primarily on the immediate health and safety of their employees and the financial impact on the company, more than a quarter were planning to enhance their offerings in a variety of ways. The pandemic is spurring consideration of improvements to plan design and expanded offerings. The top five areas they expected to address within their financial wellness programs are:

• Improve digital communications with employees (33%).
• Expand the definition of hardship to include disaster relief (31%).
• Ease the process for taking out hardship withdrawals (28%).
• Add a new financial wellness program (27%).
• Add an in-plan retirement income option (25%).

Slightly less than one-quarter—23%—were also considering adding an emergency savings option, expanding employer contributions, and changing their fund lineup, including adding stable value as an option.

Those expecting to make no changes were clearly among the minority, at a mere 11%.

In addition to demonstrating the opportunities to better tailor these programs to employee needs, insights from the survey point to financial wellness programs playing a role in calming nerves and mitigating hasty decision-making in reaction to market turbulence, Dalessio said.

Plan sponsors signaled that financial losses in employee retirement plans and the potential for delayed retirement of employees due to retirement plan leakage were not top of mind at that time. These responses were consistent with Prudential’s own experience during the same time period.

During the first three quarters of 2020, just 10% of Prudential clients’ plan participants took a hardship withdrawal, a coronavirus-related distribution or a loan, including a CARES Act loan.

“Having access to financial wellness resources, including education about budgeting, emergency savings, and debt management can help employees consider a range of alternatives rather than simply tapping their retirement plans,” Dalessio said. “This can deter workers from overreacting during a crisis, which can have a positive, long-term impact on their retirement security.”

Click here to download the fact sheet, “Prudential’s 2020 Plan Sponsor Pulse Survey: Navigating COVID-19.”