Wellness Programs: Get Results or Go Away

If you haven’t been keeping tabs over the last few months, there has been some increasing friction between the EEOC and the corporate world over a seemingly harmless set of programs focusing on employee wellness. Note that this is primarily focused on health and wellness programs, not those targeting financial wellness.

While this has been frustrating for those affected, it does provide an impetus for companies that is long overdue. In the long run companies will focus more on wellness programs that actually bring results, not just on checking the obligatory box on a list of employee benefit offerings.

Wellness by the Numbers

According to the Kaiser Family Foundation Health survey:

  • 94% of firms with over 200 employees offer wellness programs
  • 11% of those organizations have penalties for employees that do not complete all required health management procedures
  • 9% of large companies penalize employees for not meeting specific biometric outcomes (BMI, cholesterol, etc.)

Wellness is here to stay, with the majority of companies believing that offering these types of options will help to lower insurance costs over time.

The Battle for Wellness

Orion Energy Systems was a typical organization with regard to its wellness program. It required health-related actions from its employees and used incentives/penalties to encourage the behaviors consistent with its wellness program goals. But it didn’t turn out so well.

Orion instituted a wellness program that required medical examinations…  When employee Wendy Schobert declined to participate in the program, Orion shifted responsibility for payment of the entire premium for her employee health benefits from Orion to Schobert.  Shortly thereafter, Orion fired Schobert.

For reference purposes, Orion meets the “large company” criteria in the Kaiser report cited above.  Here’s what happened next:

Orion Energy Systems violated federal law by requiring an employee to submit to medical exams and inquiries that were not job-related and consistent with business necessity as part of a so-called “wellness program,” which was not voluntary, and then by firing the employee when she objected to the program, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed recently.

In case you’re wondering, Orion is not the only organization that falls into this category. Honeywell International also had an opportunity to face the ire of the EEOC for similar reasons.

The Outlook on Wellness

The EEOC has just released its Notice of Proposed Rulemaking (NPRM) with regard to this complex issue. This breakdown by the Jackson Lewis law firm is a great look at some of the key areas of the proposal, but one piece in particular stuck out for me (emphasis mine):

“The NPRM requires that if an employee health program seeks information about employee health or medical examinations, the program must be reasonably likely to promote health or prevent disease. Employees may not be required to participate in a wellness program, and they may not be denied health coverage or disciplined if they refuse to participate.”

Believe it or not, after all of the time, legal battles, and other resources expended on the world of wellness, it comes down to whether or not the program is actually going to promote health or prevent disease. We actually have to measure these initiatives and not just put blind faith in their ability to make our employees and organizations healthier. If that sounds a bit harsh, I’d advise you to check out this discussion on the results of wellness (or a lack thereof). On the other hand, companies like Johnson & Johnson have been more successful.

There are other aspects, such as voluntary participation and limits on incentives, but I think it’s just one more push in the direction of measuring everything and only pursuing those that are going to deliver results. Not everything that is measurable matters, but everything that matters should be measurable.

About the Author:

Ben Eubanks is an associate HCM Analyst at the Brandon Hall Group, a preeminent research and analyst firm covering Learning & Development, Talent Management, Leadership Development, Talent Acquisition, and Human Resources.

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6 Crucial 401(k) Employee Education Tips

When I present employee education sessions, employees often ask me what they should be doing in their 401(k) plan. I tell them:

Make sure you are contributing enough to receive the maximum match. You would be surprised how many employees don’t do this. I estimate that in most plans at least 1/3 of all employees do not contribute enough. Employees who do not receive the maximum match are leaving free money on the table. The return on those extra contributions? At least 100%!

Don’t trade your account. Employees get scared at market bottoms and overly confident at tops. They need to resist the urge to sell all of their equities when they are scared. Conversely, when equity markets are making new highs, they should not transfer everything into equities.

I advise them not to open their account statements during these time periods if they believe that will help them manage their emotions.

Diversify. We all have heard this over and over again from financial planning experts. Many employees like to concentrate their account balances in one or a few funds they feel will perform well or are very safe. Having all their eggs in one basket is not a strategy for success because they are essentially betting on only one economic scenario.

Keep your money in the plan. Employees work hard to save. They scrimp, deny themselves fun, delay purchases, etc. I ask them not to take loans, withdrawals or cash their 401(k) balances out when they change jobs. Taxes and penalties can reduce what they receive from these distributions by almost 50%.

In addition, they are making it impossible to ever retire by spending their retirement savings now.

Keep saving – always. Employees stop saving for a number of reasons: their spouse loses a job, they want to save outside the plan for a home, car, boat, marriage, etc. Many employees, when the equity markets fall, stop saving because they believe it is a bad time to invest in the market.

I suggest that they lower their contribution rates if they have to, but never go to 0%. Remember, we all need to average 15% in savings over our entire careers to retire at our current standard of living.

The most important factor is… I am always asked, “What is the most important thing I need to do to build the 401(k) account balance I need?” I ask employees to guess what the answer might be. No one ever gets it. It’s not how you allocate your balance, what funds you invest in, whether you market time appropriately, the cost of your investments or how they perform. None of these are the correct answer (although they are all important).

It is how much you save.

That is such an obvious answer that I always get a number of groans. But it is true. Nothing matters more than the amount that someone saves.

Make sure your next employee education sessions address these topics. Your employees will be grateful for the encouragement and support.

About the Author:

Robert C. Lawton is president of Lawton Retirement Plan Consultants, LLC a Registered Investment Advisory firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities.

Reprinted from Employee Benefit News

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10 Attributes of a Retirement-Ready 401(K) Plan

As a 401(k) plan sponsor you have no doubt embraced the concepts of retirement readiness. A significant part of helping employees achieve retirement readiness is providing a 401(k) plan with features that guide participants down the path to retirement readiness.

The following 401(k) plan attributes are generally felt to promote employee retirement readiness:

Plan Design

1. Auto-enrollment. Automatic enrollment of all new participants at a default contribution percentage of at least 3%.

2. Auto-escalation. An increase in participant contribution percentages of 1% per year, typically up to a maximum of 10%.

3. Auto re-enrollment. Automatic enrollment each year of any participant who opts out of initial enrollment at their time of hire or who stops contributing during the year.

4. Hardship withdrawal provisions for loans. In an effort to plug leakage, requirement of hardship withdrawal criteria in order to take a participant loan.

Contributions

5. Roth 401(k) availability. Participant ability to elect to make after-tax Roth 401(k) contributions.

6. Extended employer match. An employer match spread over a larger percentage of employee contributions. For example, 25% of the first 12% rather than the standard 50% of the first 6%.

7. Catch-up contributions. For those participants age 50 and older, the opportunity to make additional 401(k) catch-up contributions.

Investments

8. Availability of index funds. For those participants who believe that passive investment is the only way to go.

9. Right number of fund choices. More is not better with regard to fund choice. More is confusing. Most experts feel that the right number of funds is generally around 12 (not including target date fund options).

10. Availability of target date funds. Professionally managed target date funds for those participants who prefer to have someone else manage their account.

How many of these retirement ready features does your 401(k) plan have?

About the Author:

Robert C. Lawton is president of Lawton Retirement Plan Consultants, LLC a Registered Investment Advisory firm. Reprinted from Employee Benefit News

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