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Financial wellness plans can decrease company costs

As the climate for financial independence changes, some companies are attempting to educate their employees about money management so they can contribute more money to their retirement.

Financial expert Michael Case Smith began Edge 401(k) Funds with partner Thomas Ruggie last year. Smith said the time has come for companies to take a look at how they are helping their employees become more financially stable.

“The results from the last three decades of the traditional 401(k) are in and they are not good,” Smith said. “Today, the vast majority of people are dealing with their daily financial stresses and cannot worry about putting aside money for retirement.”

Smith said the goal for Edge 401(k) Funds is to help people not only save for retirement but also with their everyday financial security.

Insurance Office of America , one of the nation’s largest independent commercial risk and benefit managers, turned to Smith and Ruggie to develop a program to upgrade retirement plans for IOA clients. Now, they’ve turned it into a separate business and companies in Jacksonville and beyond are reaping the benefits.

Smith said years of research led them to three reasons that traditional 401(k) plans don’t work: the fees are too high, employee do-it-yourself investing doesn’t work, and employee education is futile.

“We realized that traditional 401(k) plans don’t do much to engage participants in helping them reach their financial goals,” Smith said. “The fancy brochures and extensive presentations don’t help the average American to become financially healthier.”

Edge 401(k) Funds’ goal is to engage customers through a financial wellness plan within a mutual fund. The plan teams up the client with a personal finance coach to help them to establish a budget, decrease credit card debt and essentially have more money that they are able to put aside for retirement. And Smith said it’s at no extra cost to the employee.

“The fee is embedded inside of the mutual fund so that there is no additional cost to the employee or the employer,” he said.

Smith believes financial wellness leads to a healthier individual overall, decreasing the cost that a company spends on wellness benefits each year.

“This is one of the highest costs to a company every year,” Smith said. “Companies are always trying to learn about what will make their employees healthier and more productive.”

A Society for Human Resource Management study found that personal financial challenges have a large impact on employee performance and are most negatively affected by personal financial challenges.

“Employees who enjoy peace of mind regarding their personal finances are more inclined to be happy, productive associates who transfer the quality of their employment experience into everything they do,” Smith said.

He hopes companies will start to take a closer look at how they are helping employees navigate their financial stability and said the demand is growing.

Ninety-two percent of employers indicate they are very likely to create or expand their focus on financial wellness in 2015, according to Aon Hewitt ‘s 2015 Hot Topics in Retirement.

“By giving someone the tools that they need to become more financially healthy,” Smith said, “you’re decreasing their stress level and contributing to an overall healthier lifestyle.”

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