Increased interest in employer-sponsored financial planning programs also results from the changing character of employee benefit programs themselves. Today, employees often have more choices and fewer guarantees than they had a decade ago. Many employers are moving away from the more traditional paternalistic role as providers of predictable levels of financial security. Instead, responsibility for managing benefits to achieve future financial goals is left increasingly to the employee.

To better equip employees in handling their increasing responsibilities in this changed environment, employers use many methods to inform, educate, and motivate individuals to engage in effective personal financial planning. Employer-sponsored financial planning programs are still in their early stages of development and are by no means widespread. However, employer and employee interest in these programs is growing.

For some time, many employers have offered access to comprehensive financial planning to a limited number of executives as an extra benefit. For the most part, this has taken the form of personal financial planning assistance on a one-to-one basis in individual sessions with a professional advisor or firm.

Employers tend to limit those receiving this assistance because the individual sessions are expensive and because employers often feel that most employees do not need sophisticated financial planning help. As more employers have recognized the need to provide financial planning assistance to employees at lower levels, the focus has been on group- based financial planning programs that provide information about the basics of financial planning and the role of the employer's benefits package in meeting a range of common financial objectives at various stages of life.

Why Is Employer Interest in Financial Planning Growing?

In November 1991, Buck Consultants conducted a nationwide survey about employer-sponsored group-based financial planning programs. Responses were received from 411 U.S. employers.

Eleven percent of the responding employers indicated that they offered group-based financial planning programs. Of those not offering these programs, 9% indicated that they planned to do so within the next two years and another 4% said they intended to do so within the next five years. Another 22% indicated that they expected to eventually offer financial planning programs.

* Employers already sponsoring group-based financial planning programs cited three major benefits they believe result from these efforts;

* Increased awareness by employees of their responsibility for securing their own future;

* Increased appreciation for and effective utilization of employee benefit programs; and

* Improved employee morale, goodwill, and productivity.

The message generally underlying an employer's financial planning programs is that employees should take more responsibility for their future financial security. Instead of depending solely on benefits provided by employers and the Federal government, employees are encouraged to see their quest for financial security as requiring a partnership in which they play a key role.

Making Better Use of Benefit Plans

A good financial planning program makes employees more aware of their employer-provided benefits. It helps employees understand the provisions of each benefit plan and how each benefit plan can relate to an employee's various financial objectives. Due to increased reliance on defined contribution and flexible benefit plans and increasingly complex tax rules, it has become much more important for employees to understand how each plan works.

Defined contribution plans are taking on greater importance as sources of retirement funds. Many employers recognize that if employees do not maximize their defined contribution plan balances, they might not be able to afford to retire--much less retire early. Some of these employers are going beyond traditional communications and helping employees estimate the size of the nest egg that a plan can be expected to provide and convert this projected asset into estimated after-tax retirement income.

Generally, employees participating today in 401(k) and other savings plans have more investment options under these plans than were available in the past. However, there is clear evidence that employees are frequently too conservative in their choices under the plan to achieve good investment results. Some employers, recognizing their own interest in having employees maximize savings for retirement, are providing employees with additional information about investing to encourage employees to allocate invested dollars wisely.

Employee Morale

Many employees, particularly younger and lower-paid employees often underestimate the amount they should be saving for distant goals like retirement. Many are also dipping into their employer-sponsored 401(k) and other savings plans to finance short-term, non-retirement needs and desires. At the same time, low participation rates among lower-paid employees in these plans sometimes adversely affect the amounts that higher-paid employees may contribute.

The failure of employees to save enough to provide themselves with adequate retirement income is of particular concern considering possible cutbacks in employer-provided benefits--particularly retiree medical coverage. Also, employees who have accumulated more in a savings plan are in a better position to take advantage of any early retirement window benefits that are offered.

Employees typically respond to these challenges with anxiety, confusion, and resentment. Practical financial planning programs can enable employees to deal with these challenges more effectively.

The goals of a quality financial planning program are to help employees better prepare to meet the financial challenges that they face and to increase goodwill toward the employer.

Types of Financial Planning Programs

Employers sponsor a range of programs that provide financial planning information to employees. Some employers take a one-shot approach to financial planning; for example, by offering the opportunity to attend a financial planning seminar, or issuing a booklet on financial planning for distribution to all employees. Other employers often periodically repeat some programs to impress upon employees the need for ongoing financial planning.

The following are financial planning activities currently used by employers.

Group Seminars. Financial planning seminars enable groups of employees to learn financial planning techniques and essential information about their benefits, taxes, and investments.

Group seminars can communicate financial planning information effectively because they rely on personal interaction among participants. The give and take between participants and the seminar leader or among participants themselves can keep things lively as complex subjects are related to genuine personal concerns.

Spouses are usually invited to attend because of their important role in financial planning. Financial planning seminars often turn out to be the first time that spouses of employees learn about their benefits as dependents and possible beneficiaries.

Group seminars are often held away from the work site--usually at a hotel or conference center--so as to isolate attendees from their everyday work concerns. Some employers offer seminars during paid work time. Others limit the seminars to non-work time (i.e., evenings or week-ends) or split the seminar between paid and non-work time so that employees share some of the cost.

The seminar leader plays the key role in making a financial planning seminar work well. The leader must be able to communicate financial concepts clearly and concretely and respond effectively to complex questions. The leader should be able to generate informed discussions and provide accurate technical information, particularly about taxes and benefits.

Self-Study Materials. Financial planning manuals can be distributed to employees for their own personal use. These publications typically include not only comprehensive information about various financial planning subjects, but also worksheets and forms to enable users to engage in planning. Self-study guides can be used on a stand-alone basis or in conjunction with group seminars.

While there are many off-the-shelf financial planning guides, a manual that is carefully tailored to the employer's particular benefit plans will be better received by employees and will be more useful to them.

Booklets, Bulletins, and Newsletters. A series of concise, periodic publications can address different financial planning topics. Ideally, each publication includes information about specific benefit plans that come into play with the particular subject. Booklets, bulletins, and newsletters can be organized around different substantive subjects (e.g., taxes, investments) or around different career or life events (e.g., joining the company, getting married).

Videotapes. A financial planning program on videotape can help employees and their families learn about financial subjects on their own time, at their own pace, and in their own homes. If accompanied by a workbook, the video program can also help employees apply the information presented to their own personal objectives.

While the interaction offered by a group seminar is lost in a video approach and the cost of a quality production is high, this type of program can reach many employees quickly and is significantly more effective than using written materials alone.

Enhanced Benefit Statements. Benefit statements can be enhanced to include useful financial planning information. For example, the periodic statement issued for a 401(k) or other savings plan can show how the plan works as a retirement vehicle. Plan balances can be projected by assuming different contribution and growth rates over different periods based on each employee's retirement age. Monthly retirement income can be estimated too.

Individualized Computer Projections. Computer-generated financial planning reports can be provided to employees based on questionnaires that they complete. The questionnaires elicit personal data and the assumptions that the employee wishes to use for various projections.

Some employers pay the full cost of these reports, while others make them available on an employee-pay-all basis. Still other employers share the cost, for example, by paying for only the first report to get employees started and then requiring employees to pay the full cost of any follow-up reports.

Financial planning applications can be added to an employer's mainframe benefits information system. Employees can access the system either through worksite terminals, home computer modems, or touch-tone telephone voice response systems. Employees then can directly obtain various projections by using different "what-if" scenarios and assumptions. Printed reports can be generated for employees to review and retain.

Financial planning software programs can also be provided to employees on diskettes for use on personal computers, at home, or elsewhere.

Keep Information Objective. It is essential that an employer-sponsored program provide information objectively. Employers should be concerned about who really controls what is being presented. For example, employers may be tempted to use sellers of investment products, who often will conduct seminars or furnish communication tools for little or no charge.

Savings achieved by using what might be biased information can be illusionary. Slanted presentations might encourage participants to make inappropriate decisions.

While the nuts and bolts of financial planning are dollars and cents, an effective program must recognize the human dimension too. A program that offers employees hard copy alone-for example, workbooks and printouts-- or only software for use on personal computers may fail to achieve the level of participation desired or to motivate most participants to change their behavior. Sensitivity to the varying interests, needs and priorities among employees of different ages, pay levels and life situations are necessary to assure success.

A Worthwhile Employee Benefit

Employers are becoming increasingly interested in educating employees about financial planning. Generally, employers want to help employees take greater responsibility to save more and invest more effectively for the future. Employer-sponsored financial planning programs can be a cost-effective way to enhance employee goodwill and to lessen pressure to improve or add benefits financed and guaranteed by the employer.