In 2023, Bank of America’s Annual Workplace Benefits Report reported that an all-time low of only 42% of employees feel financially well. Since financial stress may lead to employee absenteeism, lower productivity, and health problems like high blood pressure, anxiety, and depression, employers may want to consider adding financial benefits to their overall benefits strategy. Let’s take a look at some options.
Traditional Financial Benefits
Long-standing financial tools like profit-sharing plans and 401Ks offer some tax savings and may contribute to a more comfortable retirement. Yet, with their annual contribution limits, early withdrawal penalties, and substantial regulation, not all employees can maximize these tools. Many workers will also admit that, despite regularly contributing to these plans, they need help understanding them better.
Creative Financial Benefits
Today’s employees seek more employer support for mental, emotional, financial, and physical well-being. In response, employers are offering a variety of creative benefits. Some that are growing in popularity include:
Tax-Advantaged CDH Accounts
Tax-advantaged consumer-directed healthcare (CDH) accounts can provide employees with significant annual tax savings. Participants may save an average of 30% or more on funds to cover eligible products and services.
On top of their short-term tax savings potential, Health Savings Accounts (HSAs) can create an alternative retirement path. Unused funds roll over annually, earning tax-free interest on balances and tax-free returns for those who invest unspent funds. According to the 2023 Midyear Devenir HSA Research Report, HSA investment assets grew 20% year over year. However, only about 7% of all account owners invest at least part of their unused balance, so it’s still a largely untapped resource.
Lifestyle Spending Accounts (LSAs)
Lifestyle Spending Accounts (LSAs) are the newest and most creative financial benefit. They are funded entirely by the employer and can offer immediate support to employees for physical, mental, emotional, and financial well-being. Eligible expenses are practically unlimited and entirely up to the employer. Remember, though, employees are liable for taxes on any amounts received.
For example, employers can use LSAs to reimburse employee costs to access financial products and services such as:
- Estate planning
- Financial advisors
- Financial seminars
- Budgeting classes and apps
Emergency Savings Accounts
Recent studies by Fidelity, SoFi, and Willis Towers Watson (WTW) show that emergency savings accounts are among the most sought-after financial benefit programs. With these, employers make it easier for employees to build rainy-day nest eggs by automatically directing scheduled payroll deductions into savings accounts. As they offer no tax advantages, there are no regulatory limits on amounts set aside or restrictions on withdrawal.
Student Loan Assistance Programs
The federal government has a limited student loan forgiveness program for those who meet specific guidelines. Workers may also receive employer assistance, as companies can contribute up to $5,250 annually toward an employee’s student loan debt. These payments are qualified business expenses for the employer and tax-free to the employee through 2025.
Talk to us about Financial Benefits
Employers must offer more than traditional financial benefits to attract and retain the best talent. Fortunately, there are several options available. Talk with us to learn more!
Beneliance has provided Arkansas employers with comprehensive third-party employee benefits administration and compliance services since 1996. Please enter your email (above right) to receive notifications about new blog articles as they are published.
