Financial wellness has generated a lot of buzz recently and with millions of dollars pouring into FinTech development it’s time to take the first look at the future of financial wellness through the lens of a recent Senate hearing.
On August 21st the Senate Health, Education, Labor and Pensions Subcommittee (HELP) held a hearing on Primary Health and Retirement Security. It featured a roundtable discussion on “Financial Literacy: The Starting Point for a Secure Retirement” that focused on the effectiveness and future of employer-sponsored financial wellness programs.
“Although we are in the early stages of assessing the impact of these programs, we are seeing encouraging results in terms of both engagement and the actions individuals take to improve their financial wellness after engaging with digital and/or on-site financial wellness services,” Vishal Jain, a VP in Prudential Financial’s Workplace Solutions Group, testified.
Lynn Dudley, SVO, Global Retirement & Compensation Policy at the American Benefits Council noted the areas in which companies are seeking to help their employees. In addition to helping employees deal with student debt and setup education savings programs for their children, like Section 529 plans, employers are also helping employees develop emergency saving funds (since roughly half of Americans can’t afford an unexpected expense like an emergency transmission repair). Dudley also mentioned the recent IRS private letter ruling that might make it easier for more companies to help their employees with student debt.
Scott Astrada, Federal Advocacy Director at the Center for Responsible Lending, was critical of payday lending programs because consumers can easily become trapped in a cycle of debt that affects their retirement savings efforts. Interest rates on payday loans can be as high as 400 percent on an annual basis. Astrada believes state interest rate caps could offer some relief to those who utilize payday loan services.
Future financial wellness programs will take advantage of technology to streamline communications. Specifically, the electronic delivery of retirement plan documents could enhance benefits communications.
“In particular, legislation that further encourages and facilitates the use of auto-enrollment and auto-escalation can enhance both retirement plan participation and savings rates. And, provisions that remove impediments to the inclusion of guaranteed lifetime income solutions as part of a retirement plan can better ensure employees have access to the products they need to effectively manage investment and longevity risks during their retirement years,” Jain testified in support of the Retirement Enhancement and Savings Act (RESA) and further legislation.