Financial Wellness and DEI Are Two Sides of the Same Coin

Employers say the biggest challenges they face in 2024 are financial wellness and diversity, equity, and inclusion (DEI).? Good news: They can be addressed together, with positive outcomes for both.

That’s according to a recent article in Employee Benefit News, penned by John Lowell, partner at October Three, a defined benefit (DB) plan solutions provider.? Lowell noted that rarely do employers integrate DEI into their financial wellness programs, but “they can and should.”? Employers often measure DEI and financial wellness metrics separately, but don’t link the two initiatives cohesively.? Employers are deeply concerned about the financial wellness of their employees.? However, if they’re not comfortable with measuring the success of these programs within different cohorts of their workforce, they can’t be certain whether they’re serving traditionally underserved populations as well as they might.

These metrics can be long- or short-term.? Mr. Lowell wrote that it’s easier to measure long-term wellness and recommended that employers measure projected retirement outcomes as a part of a DEI initiative.? “In other words, how well are various parts of their employee population making use of retirement benefits so that when they are combined with Social Security benefits, they will have financial independence in retirement?? Sadly, our research shows that traditionally underserved populations tend to fall far short of that goal,” he noted.

Mr. Lowell also explained that while most employers offer a traditional 401(k) plan with a match, they aren’t consistent with a DEI program.? That’s because employees must contribute a certain amount of their pay to qualify for the match.? Traditionally underserved populations are often lower-paid, so they don’t make enough to contribute to the 401(k) plan and qualify for the match.

He recommended that retirement plan advisers steer employers toward offering a defined benefit (DB) plan, which provides guaranteed lifetime income for retired employees.? In combination with a defined contribution (DC) plan such as a 401(k) or 403(b), DB plans provide a strong financial foundation for retirement, taking the pressure off employees to accumulate adequate savings all on their own.? According to Mr. Lowell, “[A DB plan] is designed to provide a sufficient amount that not only does in help in financial wellness, but the security it provides also is critical to great mental health.”? Improving financial wellness causes a ripple effect of positive benefits: greater employee satisfaction, higher retention rates, and better productivity across the board.

DB and DC plans can work in tandem to deliver positive financial wellness outcomes and help employers meet their DEI goals by offering equitable benefits that deliver both financial security and peace of mind for all employees.? Mr. Lowell said it best: “When a DC savings plan operates alongside the DB plan, each employee can personalize their usage of that plan as they need to balance between current financial wellness and future financial wellness. It’s a way to provide equitable outcomes for a diverse workforce.”