Can Employee Financial Wellness Be Funded With ERISA?

If you are considering or have already begun offering a financial wellness program to your employees, you are not alone.

A recent Prudential survey found that 83 percent of employers offer some type of financial wellness benefit.¹ The most common elements of these programs include:

• Digital portals for access (67 percent)
• Tools and calculators (66 percent)
• Retiree planning (62 percent)
•  Access to financial advice or advisors (60 percent)

The decision to help employees become financially educated and secure is an easy one to make.

The challenge is determining how to pay for the added benefit.

One way is through the Employee Retirement Income Security Act of 1974 (ERISA).

What Is ERISA?

ERISA is a set of standards for retirement and health plans in private industries.²

These government standards protect individual employees who participate in employer-sponsored plans.

This law is important because it holds those in charge of retirement savings to a high standard, protecting retirement funds from abuse and mismanagement.

The ERISA responsibilities of retirement plan managers include running the plan such that participants receive benefits and the plan expenses remain reasonable.³

To do this, they must prudently invest to reduce the risk of losses and follow the plan documents. They also have to avoid conflicts of interest.

If you offer an ERISA-approved retirement plan, you likely have a separate account called an ERISA budget account.

Once administrative costs and legal expenses have been paid for, the rest of the money is put into this account to provide needed resources to employees.

In the right circumstances, this money can pay for financial wellness. 

Definition of General Financial Education

Employees want general financial education that includes more than retirement planning.

More importantly, they want their employers to facilitate the delivery of that information.

A Bank of America study⁴ shows that 40 percent of employees want their employer to:

• Bring in professionals to teach on general financial topics
• Provide a financial wellness plan that can be tailored to their specific needs
• Provide access to a financial advisor to help create a personal financial strategy

For ERISA, to be general financial education and not a fiduciary partner, the program must provide general financial information to all plan participants and beneficiaries, such as investment objectives and philosophies, investment timeline horizons, risk tolerance, and more.

All hypothetical examples should include individuals across different timelines and with different risk profiles and must be based on accepted investment theories.

Additionally, plan participants should get a disclosure statement stating that there are many investment alternatives available under the employee plan along with information about where to get more information.

This statement will also direct participants to consider all wealth and income, not just plan interests.

ERISA and Holistic Financial Wellness Programs

Although not specifically addressed by the Department of Labor, financial wellness programs are consistent with their findings in the bulletin, A Look at 401k Plan Fees.⁵

In this bulletin, they state that educational seminars and retirement planning software, if offered plan-wide, meet the ERISA guidelines for expenses.

Since general financial wellness programs encourage financial literacy and wellness similarly to seminars and software, a holistic financial wellness program may qualify as a permissible plan expense under ERISA if such a plan affects how ERISA-approved plan participants prepare for retirement. Drawing such a conclusion is not difficult.

Without basic money management skills, employees cannot manage their daily living expenses.

When this occurs, they do not contribute money to their retirement plan. Since the main objective of a retirement plan is to provide participants with retirement benefits, providing employees with the resources to have future retirement benefits is consistent with the ERISA goal.

Therefore, offering general, unbiased financial education would be in line with ERISA guidelines.

Of course, before paying for a program with ERISA budget funds, be sure that the program follows all ERISA guidelines and fiduciary responsibilities.

You can do this in conjunction with legal counsel knowledgeable about ERISA and retirement benefits. You can also find more information about ERISA at the Department of Labor website.⁶  

Things to Consider

Before determining that an ERISA budget account can pay for your financial wellness program, you should keep the following in mind.

Unless expenses for financial wellness initiatives are stated clearly in your retirement plan documents, you will need to amend the documents to allow plan assets to pay for the program.

To make such amendments, be sure to follow the guidelines provided by your legal counsel.

Also, to be sure that you are within ERISA guidelines as well as rules created by the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act, you will also need to follow these new ADA⁷ and GINA⁸ rules:

• Any financial wellness program that is part of a group health plan that asks about health or includes medical exams may offer incentives up to 30 percent of the total cost of self-only coverage. The same incentive can also be given for spousal participation, though no incentives are allowed for any genetic information or for children’s information.
• Information from wellness programs can only be disclosed as a collective, not as an individual’s specific information.
• Participants must be informed as to what information will be collected, why it is collected, who will see it, and how the information will be kept confidential.

Don’t let the cost of a financial wellness program keep you from introducing this benefit to your employees.

Instead, consider tapping into your ERISA budget for a holistic financial wellness program like Enrich.

To learn more about what’s included in a holistic employee financial wellness program, watch this video.

1 - https://www.prudential.com/media/managed/documents/rp/B-and-B_Exec_Summary_Flyer_rF2_DIG.PDF

2 - https://www.dol.gov/general/topic/health-plans/erisa

3 - https://www.dol.gov/general/topic/health-plans/fiduciaryresp

4 - https://benefitplans.baml.com/publish/content/application/pdf/GWMOL/2017WorkplaceBenefitsReport_ARKRNPFQ.pdf

5 - https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/a-look-at-401k-plan-fees.pdf

6 - https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/health-plans

7 - https://www.federalregister.gov/articles/2016/05/17/2016-11558/regulations-under-the-americans-with-disabilities-act

8 - https://www.federalregister.gov/articles/2016/05/17/2016-11557/genetic-information-nondiscrimination-act