Financial wellness has an immense impact on an individual’s health, life, and work. Because of this, employees are looking to their employer for help managing their financial stressors.

Employers are uniquely positioned to provide support in the form of benefits, education, and other resources to their workforce. As a plan sponsor, you have the ability to offer a suite of resources that meet your employees wherever they are in their financial wellness journey and help prepare them to confidently take their next steps toward better financial wellness today, tomorrow, and long into the future.

Why does it matter?

Employees with low levels of financial wellness lose up to 10 hours of productivity per week, which costs employers $183 billion annually, according to the Society for Human Resource Management (SHRM).¹ When employees are engaged with financial wellness resources, they are more financially confident, contribute more to their retirement accounts, and save more each year toward their financial goals.² When your workforce is more financially sound, they are likely less stressed and more productive, creating a win-win for employees and employers.

Impact of plan design on retirement readiness

Retirement plan design plays a key role in the retirement readiness of your employee population. Options like retirement plan auto-increase, auto-portability, and employer match can help.

Auto-increase:

• Is also known as auto-escalation; it involves an employee gradually increasing your contribution rate by a set amount, typically 1% annually, until it reaches a plan-specific cap, often between 10% and 15%.
• Yields an average of 7% improvement in deferrals across all populations.³
• Significantly improves retirement readiness outcomes for Black and Hispanic workers.³

Auto-portability:

• Can prevent employees from cashing out some or all of their retirement plan, an action which may be subject to income tax and a 10% penalty depending on age; currently, 60% or more of terminated employees cash out.³
• Is critical to helping under-saved employees achieve financial wellness and longer-term retirement security.³

Employer match:

• Encourages employees to contribute to their retirement plan by offering a financial incentive—typically a percentage of the employee’s contribution up to a certain limit.
• Can help drive higher participation and contribution rates, especially among lower-income employees who may otherwise delay saving for retirement.

Beyond retirement plan design, what else can help employees feel more “retirement ready?”

All hail the HSA

Employers can help their workforce hedge against often-substantial retirement health care costs with a health savings account (HSA). But it’s more than simply providing access to an HSA-eligible health plan—it’s about ensuring that employees know the true value of an HSA. Here are 3 ways employers can educate their employees about how to maximize this important tool.

1. Position the HSA as a “benefit twin” to their retirement account

An HSA can be used to pay for a variety of qualified medical expenses, including some Medicare premiums and cost sharing, yet this option is often overlooked when it comes to retirement planning. In fact, only 15% of people ages 55–64 have an HSA.⁴ And among employees ages 55 and older without an HSA, half (52%) were not aware that an HSA can be used as a retirement savings vehicle.⁵ These employees may be missing out on valuable tax advantages that could help them build up savings for future health expenses.

2. Emphasize that it’s not too late to fund an HSA

A common sentiment among older employees is that it’s too late to start contributing to an HSA, but employers should help dispel this myth. HSA funds can build quickly even with a late start, particularly when taking advantage of the catch-up contribution.

As illustrated below, let’s assume an employee maximizes contributions at the end of each year from age 55 to age 65. With investment growth beginning at age 56, at the 2025 individual contribution maximum of $4,300, plus the catch-up contribution of $1,000, that employee could have more than $75,000 in potentially federal income tax-free money to use on health care expenses by age 65 (based on an estimated 6% annual rate of return).

3. Help employees plan for the realities of health care in retirement

Employees often underestimate the health care costs they could face in retirement. Breaking down the costs into essential elements, such as specific Medicare premium and deductible costs, can make saving feel more attainable. Provide a realistic breakdown of these numbers—and highlight how long it would take to build up these funds in an HSA at various contribution levels.

To maximize the potential benefits of an HSA in retirement, employees must consider specific strategies and rules related to contributions, catch-up contributions, and distribution timing. In addition, there are specific rules for when an employee must stop contributions to an HSA in advance of Medicare enrollment. 

On a legislative note, the recently-passed One Big Beautiful Bill Act expands HSA access to those enrolled in bronze and catastrophic plans purchased through the health insurance marketplace, effective January 1, 2026.

What’s next?

A good starting point would be to gain a deeper understanding of how your workforce views your current benefits lineup. Gaining insights into employee views on financial wellness options can help shape your future benefits lineups. For instance, it may be surprising for employers to realize that the quality of an employer’s “must-have” or top benefits (health/vision/dental insurance, retirement plan, employer match, and paid time off) is more important to employees than having more benefits. In fact, 60% of employees would prefer that their employer improves the quality of the existing offerings before adding new benefits.

Consider adding the following statements to an existing employee engagement survey or create an entirely separate employee benefits survey.

Below are statements about your workplace benefits. Please indicate the extent to which
you agree or disagree with each statement (with 5 being strongly agree and 1 being strongly disagree).

1.  The benefits that I have access to meet my needs.
2.  My benefits save me money.
3.  My benefits show me that my employer appreciates me.
4.  My benefits help me to achieve important life goals.
5.  My employer provides a generous benefits package.

Concluding this brief survey with an open-ended question asking what 1 additional benefit your employees feel would best prepare them for retirement could give you a glimpse into what they feel would help most.

A holistic approach

Take a holistic approach to supporting the financial wellness of your workforce. In addition to surveys, this will consist of:

1. Education, communications, and events: Provide your workforce articles and videos to help them on their retirement preparedness journey. Create targeted emails and calendar-based communications and events to engage employees.
2. Products and solutions: Many times, employees are unaware of the retirement products and solutions their employer may offer. Continually highlighting your workplace products and marketplace solutions helps keep them top of mind.
3. Additional support and resources: Offering both web-based and app-based engagement and support channels—along with more traditional phone and in-person channels—allows you to meet your workforce where they feel most comfortable when they need help.
4. A focus on engagement: It’s important for employers to engage employees in decisions about their benefits. Are you using feedback from your workforce as part of the benefits decision-making process?

Fidelity Workplace Thought Leadership team

Fidelity Workplace Trends & Insights

FOOTNOTES

1. SHRM, “Employees’ Financial Stress Is Costing Employers Billions,” July 2024.
2. Data compares participants who are more vs. less engaged with Fidelity’s services. Fidelity’s Workplace Participant Satisfaction and Loyalty online survey of 33,437 participants enrolled in their employer’s Fidelity sponsored plan(s). The survey was conducted February to March 2021 on behalf of Fidelity by InMoment, an independent third-party research firm.
3. Fidelity’s 2024 Diversity Analytics and Reporting data.
4. “2022 Devenir & HSA Council Demographic Survey,” Devenir Research, July 13, 2023, https://www.devenir.com/wp-content/uploads/2022-Devenir-and-HSA-Council- Demographic-Report.pdf.
5. Fidelity Health Thought Leadership Benefit Plan Participant Survey, Fall 2023, Q14: “Overall, how aware are you of each of the below? [That health savings accounts (HSAs) can be used as an investment and retirement savings vehicle]”; sample consisted of 688 consumers ages 55 or older without an HSA.
6. Fidelity’s 2022 Total Well-Being study.

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