A new report by Prudential Financial, Inc. on the interconnectivity of benefits suggests the need to strike a careful balance to support employee financial wellness and productivity.
“Insights for Optimizing Your Employee Benefit Program” shows producers and their employer clients just how linkages between retirement, disability, critical illness and accident insurance offerings affect outcomes. It also casts a light on the power of customized packages.
“Understanding the levers for each type of benefit is the best way to develop a platform that supports productive behaviors,” according to Christine Marcks, president of Prudential Retirement.
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For example, employees with lower amounts of disability benefits could stop contributing to their 401(k) or borrow against the plan to pay for healthcare and living expenses. In essence, it could create a domino effect that leaves employees without adequate financial protection.
On the other end of the spectrum, a recent analysis of 40,000 Prudential disability claims showed that overly generous disability coverage could serve as a deterrent for return to work. Claimants who could cover more than 90% of their monthly expenses were home an average of 23 days vs. just 13 days for those who could cover only half their expenses.
Rethink benefits
Mindful of these examples, Marcks explains that it’s vitally important to structure benefits in a way that can maximize employees’ ability to prepare for a financially secure future. As part of that strategic mission, the objective is to rethink benefits not simply a cost to be controlled, but an investment that can be closely aligned with business goals.
“More and more,” she reports, “we see advisers working with retirement service providers on customized benefits packages that recognize the multiple barriers that can get in the way of saving, and that can help more participants take charge of their financial futures.”
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Having immediate access to more data than ever before is certainly helping the industry focus on “which employees are accessing benefit programs and how those programs perform,” according to Marcks. Indeed, Prudential’s report notes that data analytics can help determine how benefit plan designs are driving employee behaviors and affecting business outcomes.
Andrew Sullivan, president of Prudential Group Insurance, says “drilling down into the details of the benefit offerings to more finely target their impact can best bring those goals into alignment.”
