2020 CAP Suppliers Report: Stretching into the financial wellness space

In the old days, employers would often gather employees in a dusty conference room and pass around a box of Timbits while talking at a sea of bored and confused faces about the importance of retirement savings. Not anymore. These days, many capital accumulation plan sponsors and insurers are pivoting away from dull information sessions toward slick digital financial wellness offerings that employees can access at the swipe of a screen.

Even before the coronavirus pandemic made in-person meetings difficult and destabilized the economy, many plan sponsors were already on the path to taking a more holistic approach to employee financial wellness.

Read: Canadians prioritizing financial wellness planning in pandemic economy: survey

“In order to help with securing our employees’ future needs, we recognize that having a sound group retirement platform is essential,” says Tracy Fogale, senior manager of compensation and benefits at Kraft Heinz Canada. “Our goal is to provide a sustainable pension program that supports the needs of our diverse workforce — regardless of age, family status, investment knowledge, etc. We acknowledge that a one-size-fits-all approach is not best suited for us, which is why we offer a [defined contribution] plan with a variety of options for employees.”

The global food and beverage company’s Canadian DC plan, which is available to hourly and salaried employees, incorporates mandatory employee and employer contributions, as well as a 150 per cent company match on any voluntary contributions. In a bid to support employees through all of life’s ups-and-downs, Kraft Heinz’s retirement platform also includes a voluntary group registered retirement savings plan. And employees can also choose to allocate their annual performance bonus to the registered retirement savings plan.

In addition, the company has worked closely with its pension plan provider and employee assistance program provider to educate employees on a variety of financial topics, providing them with practical resources and tools, such as free access to credit counselling and debt management services.

Since the initial lockdown in mid-March, Kraft Heinz has also offered virtual one-on-one financial and retirement sessions and communications on investment basics. These offerings are alongside other initiatives promoting mental well-being, such as a virtual talent show and online yoga classes, in an effort to provide employees support on all fronts.

Read: 81% of Canadians say coronavirus is negatively affecting their mental health: survey

“Financial stress is widespread and is not just about the strain on the wallet, but can have an impact on an individual’s overall health — physical and mental,” says Fogale. “With the health and economic uncertainty of the pandemic, having a sound financial wellness platform is more important than ever, which is why we have had a strong focus on financial health over the past couple of years and especially over the past several months.”

By the numbers

An October 2020 survey by FP Canada found money is the No. 1 cause of stress for Canadians, with 38% of respondents saying money outranks personal health (25%), work (21%) and relationships (16%) as their top source of stress.

It also found 40% of Canadians said the coronavirus pandemic has impacted their financial stress levels, with 10% saying the pandemic has had a significant impact.

Indeed, CAP sponsors are increasingly focused on encouraging overall financial wellness among their employees; the economic impact of the global pandemic has simply brought the need to encourage financial literacy and wellness into sharper focus.

“The pandemic highlighted the need for financial education for employees with CAPs,” says Janice Holman, principal at Eckler Ltd. “While employees have always been keen to receive financial guidance and education through their employer, the need for it was brought to the forefront when employers were seeing their employees heading for challenging financial times.”

From IRL to digital

In delivering financial wellness programs during the pandemic, one challenge both plan sponsors and insurers are facing is going from slowly walking toward a digital-first approach to breaking into a sprint. While strides are being made, the CAP industry still has work to do in offering the type of apps and content that people are used to engaging with in their daily lives, says Holman.

“[Employees] want to have high-touch digital solutions that inform them and allow them to then delegate, as opposed to the old-school way of dividing advice where you have to come with all of your statements, be very informed about your financial information and you have to understand what that person is telling you. It’s almost like [it’s] only for financially well, literate people. . . . So we have to bring that downstream. [Financial wellness] has to become a daily thing.”

Read: Five workplace changes that should stay post-coronavirus

Shawn Kauth, assistant vice-president of strategy, product and partnerships for group retirement services at Sun Life Canada, says the insurer has seen a greater appetite from plan sponsors to provide offerings beyond a DC pension plan, such as tax-free savings accounts and RRSPs.

Before the pandemic, the insurer was already “on a path to digitizing” and quickly shifted to providing plan sponsors and their members with virtual, real-time financial wellness offerings, he says, noting there’s been a particular uptick in requests from CAP sponsors to offer employees help via credit counselling services.

Combining short, long term

Indeed, many plan sponsors, including Kraft Heinz Canada, are offering virtual credit counselling and debt repayment services since the pandemic hit as many employees have immediate financial worries that need to be dealt with.

Scott Anderson, regional vice-president of employee benefits at Hub International Ltd., says while the focus of CAPs remains on long-term savings, providing more information on shorter-term issues is a great way for plan sponsors to engage members well before they near retirement. Employers offering programs that help younger staff pay off student debt faster, for example, can encourage these employees to think about financial wellness right now.

“As early as six to seven years ago, experts were going out and doing capital accumulation plan education and talking about long-term savings and getting to retirement. We found we’re either looking at people who are near retirement in the crowd that wanted that information or blank stares from young people. So it’s all well and good to say, ‘Save for 30 years
out into the future,’ but it’s tough to visualize that . . . especially in times like this. So I think the industry learned a lesson from that and started to build financial wellness packages and financialwellness education.”

Key takeaways

• Plan sponsors and insurers have to meet members where they’re at, which means offering robust online financial wellness tools.

• The global pandemic is highlighting the need to offer employees a well-rounded financial wellness program beyond a straightforward retirement savings vehicle.

• Physical, mental and financial wellness are all linked and employers must address all three areas to ensure they have healthy, happy and productive employees.

Anderson notes this shift to focusing on overall financial wellness isn’t only good for employees but for employers, too. A 2014 survey by Hub found one in four Canadians were struggling with finances and using work time to juggle their finances. And one in 10 were extremely overburdened and using up to an hour a day of company time to deal with finances, which works out to about $750,000 of paid time lost for a company with 250 employees.

Read: Award finalists talk managing employee stress, wellness and productivity amid pandemic

Given the financial hit many people have taken due to the pandemic, it’s likely they’re more distracted by money worries than ever before. “There are a variety of different stressors out there, but I would say people’s financial priorities aren’t necessarily about just saving for retirement,” says Kauth. “Some are also thinking about the day-to-day things they have to be able to pay for, getting to next month’s rent [and] paying off debt.”

The role of CAP sponsors has expanded to helping employees with immediate financial woes to get them to the point where they can confidently focus on longer-term goals like retirement savings.

One step forward, two steps back

Of course, reaching a place that’s stable enough to think long term is difficult for many plan members, particularly in these tumultuous times.

The path to financial wellness is often winding, says Jillian Kennedy, partner and leader of DC and financial wellness at Mercer Canada, noting there are generally three buckets that employee financial goals fall into — the idea is they progress from one bucket to the next through various life stages.

The first bucket is about taking control of basic day-to-day finances, the second involves gaining confidence to start thinking about longer-term plans and the third is setting long-term financial goals and having the resources to actually put a percentage of earnings toward retirement and other big goals.

Read: Pandemic boosting relevance of financial wellness offerings: survey

“On the employee side . . . a lot of Canadians may have been in bucket two or three and we’re seeing COVID pushing almost all Canadians back to bucket No. 1,” says Kennedy. “Just the whole concept of uncertainty is creating a lot of paralyzation, a lot of not being able to look too far in the future and also reprioritizing where money goes . . . not because of instant gratification but because you need that money.

“So I think there is a disconnect because, especially in CAPs, you still see a dominance in . . . restricting money that people can access. Though employees want to achieve value, they’re saying, ‘Give me help right now, I need it’ — [it’s] yet to be seen how [those two goals will] come together. Mercer believes there needs to be a focus on the personal savings of an individual and a bridging of that gap on what employees see every day in their personal lives and what they have in their workplaces.”

Building stability

As Kennedy notes, CAPs still lock employees into long-term savings vehicles. But the economic crisis has highlighted the need to support current financial wellness in order to get employees to better times down the road.

At Kraft Heinz Canada, that means seeing employee well-being as a stool, where there’s a traditional emphasis on the two legs of physical and emotional health with financial health as the third leg that makes an employee’s overall health more stable.

Read: Coronavirus pandemic affecting retirement plans, savings: survey

“Financial stress has been linked to behaviours that affect the quality of people’s lives,” says Fogale. “Poor management of financial stresses are directly linked to physical and mental wellness. . . . Given the link between financial wellness and overall well-being, we are taking a holistic approach and focusing on emotional, social, financial and physical well-being.

“We also recognize that, during times of financial hardship, other employee benefits can be particularly helpful. We continue to communicate other programs and benefits that are available to employees, such as our EAP, childcare resources and flexible vacation and time-off policies.”

Blue skies ahead (eventually)

While it may not feel like it right now, the havoc wreaked by the financial storms of 2020 won’t last forever and employers should continue to take a holistic view of employee wellness, says Holman.

“A positive development we saw during the market swings in February and March was that while trading among investment options increased, most employees stayed the course. So the education plan sponsors have been providing on investments over the years seems to have worked, coupled with the move to pre-packaged investment options for members.

“Now, the focus can be on the factors that have greater influence on financial wellness, such as adequate savings levels, debt management and proper financial planning.”

Read: Injecting communications with kindness and confidence during the coronavirus crisis

Kennedy echoes these sentiments, saying plan sponsors need to stay focused on the long game just as much as their employees. The last time the economy saw so much uncertainty was after the 2008 financial crash, she says, noting this uncertainty has led to skyrocketing stress levels, with many employees starting to believe they’ll never be able to afford to retire. If that’s the case, she says, “it’s a lot more detrimental, as it’s driven more by emotional uncertainty than it is by investor sentiment.”

When the health and financial storm does pass and employees are back in their cubicles, employers have to continue to move away from outdated CAP information sessions, says Kennedy. Digital-first offerings that focus on total wellness — whether it’s physical, mental or financial well-being — will be the key to ensuring employees believe that financial wellness now and in the future is still possible.

Download a PDF of the 2020 CAP Suppliers Report charts

Melissa Dunne is the interim editor of Benefits Canada.