The coronavirus pandemic and the economic downturn that followed have created hard times for individuals and businesses alike in recent months. Not only are more people stuck at home for longer stretches than they would like, but also tens of millions have been rocked by unemployment and large numbers of businesses have shuttered or otherwise faced fiscal trouble.
These ups and downs have led to difficult, previously dreaded decisions. For instance, a recent survey from the Secure Retirement Institute found that nearly half of all households have seen work hours reduced or lost their jobs entirely. For those individuals, tough financial decisions have followed. Those whose income was impacted by the pandemic say they have withdrawn from their savings accounts — including both direct-contribution and IRA accounts, as well as traditional savings vehicles — just to make ends meet.
At this point, more than 1 in 4 respondents say they have less than a month's worth of expenses in their emergency savings, or no savings at all, and only slightly more than half were confident they could cover three months or more.
Fuel to the fire
At the same time, the opportunities workers have to continue their retirement contributions and other benefits may be shifting as well. Some of that, however, is for the better. Despite facing financial hardship of their own, LIMRA found that only about 1 in 4 companies nationwide say the pandemic has forced them to consider changes to their benefits packages within the next 18 months (including 4% of employers that have already enacted reductions).
But overall, 2 in 5 respondents said their companies have altered their views on benefits, though mostly toward increasing their emphasis on such offerings. For instance, 19% of companies now say they are considering adding telehealth benefits to their offerings, while roughly 1 in 10 are thinking about providing benefits for each of mental health, caregiving and paid family or medical leave.
However, these companies largely expressed a desire for more communication from insurers about how changes around the pandemic might affect their employees.
While companies are certainly looking at the short term when it comes to thinking about new avenues for benefits offerings, things may not be as rosy when it comes to retirement planning. Separate polling from the Secure Retirement Institute finds that half of all companies are either thinking about making changes to their retirement plan investments or have already done so. In some cases, that may simply be related to who provides those benefits, but 1 in 10 said they have decided to eliminate matching contributions, and 7% that have continued matching are doing so at a reduced rate.
Furthermore, about one-fifth of companies that continue to offer matching are thinking about a reduction of their contributions, but have yet to finalize the decision.
Companies that are at least reviewing their options have become more proactive about employee communications on this front: 54% of those businesses are providing more information on the subject than usual to workers, including 26% that have already done so. More than 2 in 5 are either considering adding professional financial advice as part of their direct-contribution packages, or have already taken that step since the pandemic began.
Why it matters
Extra communication from companies, and help from experienced financial professionals, will be increasingly critical as consumers face more difficult economic times. People need to make the most informed decisions possible about how they approach these accounts and their finances in general. Why? New data from Colonial Life suggests nearly 3 out of 4 employees spend less than an hour looking at their benefits options before making a decision. In fact, more than 2 in 5 say they looked at their options for less than 30 minutes.
More worrying is the fact that 90% of respondents who took less than an hour on these decisions said they don't understand their benefits at all. Richard Shaffer, senior vice president of field and market development at Colonial Life, noted that this disconnect between knowledge and action highlights exactly why employers and benefits providers alike need to be more proactive about their education efforts. It's critical to make sure employees know exactly what they're getting themselves into before they make a decision that could have a significant financial impact on their lives as the pandemic and resulting economic downturn continue for potentially many months to come.
Along similar lines, employers that offer group life insurance benefits should also stress the importance of doing all the necessary homework to determine what's going to be right for each worker's unique situation. The more that is done to clearly explain what every benefit offering means, in straightforward language, the better off workers will be when it comes to confidently making decisions in the future.