Financial wellness has moved from a buzzword to a business imperative. With economic uncertainty, rising inflation, and growing employee stress, employers are rethinking how they support their workforce beyond traditional retirement plans. Financial wellness programs are emerging as a key strategy to improve employee engagement, reduce turnover, and enhance overall benefit value.
For plan sponsors and fiduciaries, understanding the scope, structure, and compliance considerations of financial wellness offerings is essential.
Why Financial Wellness Matters Now
As the financial landscape becomes more dynamic, employees are increasingly seeking tools and resources to help them make informed decisions about budgeting, saving, and planning for the future. In response, employers are expanding their benefits strategies to include financial wellness programs that support long-term financial confidence and engagement.
Spending on workplace financial wellness initiatives is projected to exceed $1.2 billion in the coming years. This growth reflects a broader shift in how organizations view employee benefits—not just as a means to support retirement, but as a comprehensive approach to overall financial well-being.
What Financial Wellness Programs Include
Financial wellness programs can take many forms, from basic budgeting tools to one-on-one financial coaching. Common components include:
- Budgeting and debt management tools
- Student loan repayment support
- Emergency savings programs
- Earned wage access
- Retirement planning education
- Access to financial advisors or coaches
While some tools are passive (e.g., online calculators), others involve active engagement, such as personalized coaching or integrated savings platforms. Studies show that personalized, interactive programs tend to drive better outcomes than generic resources.
Compliance and Tax Considerations
Although financial wellness programs are not typically considered ERISA-covered benefits, plan sponsors must still navigate several compliance issues.
First, many financial wellness services—especially one-on-one coaching—are considered taxable fringe benefits. Unless they qualify as de minimis or no-additional-cost services, they must be reported as income and are subject to payroll taxes. Employers should work with tax advisors to determine the appropriate treatment and ensure proper reporting.
Second, while these programs are generally outside ERISA’s scope, they can raise ERISA-related concerns if they begin to resemble retirement plan advice. For example, if a financial wellness vendor provides investment recommendations tied to a 401(k) plan, the employer could inadvertently trigger fiduciary obligations. To mitigate this risk, sponsors should:
- Include clear disclaimers that the program does not provide investment advice.
- Ensure vendors are not acting as fiduciaries unless explicitly intended.
- Review vendor contracts for indemnification and liability protections.
Equity and Access
Historically, financial wellness programs were often reserved for executives or high earners. Today, that approach carries reputational and legal risks. Employers should ensure that programs are broadly accessible and do not inadvertently exclude protected groups.
While there are no specific nondiscrimination rules for financial wellness benefits, general employment law principles still apply. Sponsors should avoid eligibility criteria that could create disparate impact and consider offering tiered or scalable services to reach a wider employee base.
Best Practices for Implementation
To maximize the value of financial wellness programs, employers should:
- Engage vendors with a fiduciary mindset, even if the program is not subject to ERISA.
- Offer opt-in participation, rather than mandatory enrollment, to respect employee autonomy.
- Communicate clearly about the program’s purpose, scope, and limitations.
- Track utilization and outcomes to assess ROI and make data-driven improvements.
Financial wellness has become a strategic benefit that supports workforce stability, retirement readiness, and overall well-being. By offering thoughtful, compliant, and inclusive financial wellness programs, plan sponsors can meet that need while strengthening their overall benefits strategy.