A Guide to Financial Literacy in Benefits Selection
Open enrollment is more than just a yearly task—it’s a crucial opportunity for employers to invest in their most valuable asset: their people. By thoughtfully selecting and offering a range of benefits, employers demonstrate their commitment to employee well-being and financial security. This period allows employees to make informed decisions that enhance their financial health, particularly in areas like retirement savings. Given how much work goes into selecting benefit offerings, it’s in the best interest of everyone involved that employees take full advantage of them.
After spending many months carefully selecting benefit options for your company, it’s time to help employees understand their options and truly make the most of what is offered. Open enrollment is one of the busiest and most impactful times of the year for any HR team, and it can also be one of the most confusing times of the year for many employees.
Overwhelmed employees may procrastinate when selecting benefits, resulting in rushed decisions. However, open enrollment offers a valuable chance to assist your workforce in reviewing the benefits available to them and gaining a deeper understanding of how to effectively integrate these benefits into their lives and personal financial plans.
According to a study by MetLife, one in five employees spend only minutes reviewing benefits before reaching a decision. Busy employees may also opt to re-enroll in their current benefits, even if these benefits aren’t actually a good fit for them. While open enrollment might feel like additional work for employees, selecting the right benefits can save them time and money, and greatly reduce their stress in the long run. The challenge and opportunity, then, is to make this process more seamless and approachable, while supporting them on a one-on-one basis with their decisions.
One of the biggest blockers to a smoother open enrollment period is a lack of financial literacy. Navigating the open enrollment process requires understanding a range of terms and concepts that employees may have never learned. We know for a fact that many Americans are confused by basic health insurance terms like copayments and deductibles. Employees need a quick, digestible, and personalized way to understand their benefits, and financial wellness programs can provide this crucial support.
Choosing benefits is never just about the benefits themselves; most of the questions that people have about benefits involve and affect their finances. For example, opting into a high-deductible insurance plan or putting money into an HSA account is much easier to do confidently if you have a clear sense of how it will impact your finances over the long run. A financial wellness program helps support employees and provides insights on exactly these kinds of considerations.
High-priority benefits, such as life insurance, commuter benefits, and health & dental coverage, involve a cost-benefit analysis and trade-offs. Selecting the right amount of life insurance coverage requires understanding current financial responsibilities, estimating future needs, picking policies, naming beneficiaries, and opting into riders and add-ons. Commuter benefits and FSAs/HSAs can also be confusing, particularly around eligible expenses and contribution limits. Employees often struggle to pick health and dental plans because understanding premiums, deductibles, and out-of-pocket maximums can be daunting, making it hard to gauge the true financial impact.
This complexity can lead to uncertainty about choosing the most cost-effective plan for their needs. All of these factors can make open enrollment feel understandably overwhelming and taxing for employees. Simplifying these complexities through clear, authoritative communication and offering personalized support can significantly improve open enrollment for all employees.
No matter what open enrollment looks like at your organization, there are a few tried-and-true best practices for ensuring your employees get the most out of it.
For employees, open enrollment is an ideal time to examine where their paycheck is going, assess their finances, and readjust their strategy if necessary. It’s also a great time for employers to showcase their retirement plan offerings and encourage higher participation rates. By emphasizing the benefits of maximizing employer matches and tax advantages, employers can help employees understand the value of proactive retirement planning and ensure everyone is getting the most out of their plan. Highlighting these benefits during open enrollment can lead to more informed decisions and improved financial well-being for employees, ultimately boosting overall participation in the retirement plan.
By offering holistic support during enrollment, employers empower their workforce to make better-informed decisions. This, in turn, will lead to a happier, healthier, and more engaged workforce. A well-executed benefits strategy not only improves employee morale; it also helps with recruiting and retention. According to research by McKinsey, many Americans say benefits are as important, if not more important, than salary when considering job opportunities. It’s more important than ever to help your workforce get the most out of their benefits. Empowering employees with the financial literacy and support they need during open enrollment not only enhances their well-being but also fortifies the overall health and resilience of the organization.
