March 2017 HR Alert
Employee Benefit Spotlight: Financial Wellness Programs
A new type of employee benefit has emerged within the last few years called financial wellness programs. These programs aim to empower participants to take control over their financial lives, with the goal of increased participant productivity as well as participation in and effective use of employer-sponsored retirement plans.
Financial wellness programs target workers’ lack of financial stability, a common issue in the workplace. Many adults possess insufficient financial literacy, and surveys of American workers indicate that as many as half of workers are concerned about their finances. Lack of financial knowledge and insufficient financial planning negatively impact retirement savings, since employees living paycheck-to-paycheck have nothing left over to contribute to retirement. This results in under-utilized employer-based retirement plans and insufficient retirement savings. Personal financial issues also carry over into the workplace. The Consumer Financial Protection Bureau reports that one in five workers admits to skipping work in the last year to handle financial matters. Another report estimates that employees spend an average of three hours per week handling financial issues while on the job. Employer-based financial wellness programs are a response to these trends, and they seek to mitigate the effects of these issues through financial education and planning tools.
Approximately one quarter of employers are now providing some form of financial counseling for employees, and many employers are turning to commercial financial wellness programs to educate their participants and foster beneficial financial habits. The popularity of these programs is driven by their simple and accessible formats, purported benefits to both participants and employers, and their relatively low cost. Commercial programs typically include a combination of interactive financial tools and finance-oriented seminars. The financial tools offered are typically accessed through interactive, web-based applications that assist participants with a variety of tasks such as assessing their financial health, setting budget and savings goals, and tracking employee progress toward those goals. Many programs also offer interactive models demonstrating the impact of spending habits on debt-reduction plans and retirement savings. Financial seminars educate participants on a series of topics essential to basic financial literacy. These may include budgeting, debt management, basic investing principles, and retirement planning. Seminars may be presented in person, via live stream or recorded session, or as a self-paced, web-based course.
Financial wellness programs claim to aid both workers and their employers, with many companies citing research on the potential benefits of increasing employee financial literacy. Employees benefit through reduced financial stress, increased long-term financial stability, and better retirement planning. Financial wellness companies claim that employers benefit from decreased employee turnover and absenteeism and increased employee productivity.
Costs vary, but many financial wellness programs operate from a tiered system with additional features and components available for a higher per-participant fee. As plans enroll greater numbers of participants they may be offered progressively larger discounts.
Financial wellness programs marketed toward qualified retirement plans may advertise that their fees can be paid with participant contributions. Administrators should carefully consider the circumstances before committing plan assets to pay for the program. When utilizing participant contributions to pay for benefits, including financial wellness programs, plan administrators are held to the fiduciary standard of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
The ERISA fiduciary standard applies to anyone exercising authority or control respecting management or distribution of plan assets. When exercising control or authority over plan assets, ERISA requires the plan fiduciary to act exclusively to provide benefits to the participants, or to provide money to pay “reasonable” plan expenses associated with plan administration. Whether fees for a financial wellness program are considered reasonable is a highly fact-specific issue, and plan fiduciaries who improperly use plan assets can be held personally liable for costs to the plan participants. Fiduciaries may also be held jointly liable for the acts of co-fiduciaries.
Given the rigorous fiduciary standards, plan administrators looking to provide financial wellness programs using plan assets should carefully consider all factors involved and their fiduciary duties under ERISA.
If you wish to provide financial wellness products for your plan participants, Hall Benefits Law encourages you to seek the advice of an experienced ERISA attorney.
60-Day Delay Proposed for Fiduciary Rule
The Department of Labor (DOL) has proposed a rule that would delay by 60 days the effective date of the DOL’s fiduciary rule and related prohibited transaction exemptions. If put into effect, the proposed delay will stall application of the final fiduciary rule from April 10, 2017 until June 9, 2017. The proposed rule enacting the delay invites comments until March 17.
This is a proposed delay that will not take effect until a final version is published in the Federal Register. President Trump previously signed an executive order requesting the DOL review the fiduciary rule and its implications.
Is Your Health and Welfare Plan Subject to the DOL’s New Final Rule for Disability Claims Procedures?
On December 19, 2016, the Department of Labor (DOL) issued its Final Rule (the “Rule”) that revises claims procedures for employee benefits under Section 503 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
The Rule outlines stringent procedural requirements for group health or disability benefits claims. More specifically, the new Rule has the following requirements for plan sponsors processing claims and appeals for disability benefits. Plan sponsors must:
1) Ensure that all claims and appeals for disability benefits are adjudicated independently and impartially;
2) Provide disclosures in benefit denial notices that include each of the following:
– An outline of all the reasons why a claim was denied and the standards used to make the decision;
– An outline of any basis for disagreement with a medical expert or vocational professional’s view of the disability claim obtained by the plan about an adverse benefit determination, regardless of whether the advice was relied on in making the benefit determination; and
– A statement that the claimant is, upon request, allowed access to their entire claims file and other relevant documents.
3) Provide claimants the right to review and respond to new evidence or rationales at the appeal level;
4) Accept that the claimant will be deemed to have exhausted all administrative remedies and permitted to pursue his or her claim in a court of law if the plan fails to adhere to claims process requirements, with a few limited exceptions;
5) Accept that any rescission of coverage, except when due to non-payment of premiums, must be treated as an adverse benefit determination, which permits the claimant to use the plan’s appeals process; and
6) Provide all claims and appeals notices in a culturally and linguistically appropriate manner.
The Rule applies only to employee benefit plans covered under ERISA that provide disability benefits. A disability benefit is a benefit whose availability is conditioned upon the claimant proving that he or she is disabled. If a decision must be made as to whether a claimant is disabled for the benefit to be provided, the claim must be treated as a disability claim for purposes of the Rule.
The Rule applies to disability claims submitted on or after January 1, 2017.
Hall Benefits Law encourages plan sponsors and plan fiduciaries to review their claims process and plan documents to ensure compliance with the requirements outlined under the Rule.
Hall Benefits Law, LLC
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