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8301 E Prentice Ave. Greenwood Village, CO 80111 phone: (303) 597-0197

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1 8301 E Prentice Ave. Greenwood Village, CO 80111 phone: (303) 597-0197

2 Eric Fischer - CFP ®, ChFC Certified Financial Educator ® Instructor

3 America’s Greatest Financial Fear “Nearly half, or 47 percent of those on the verge of retirement are predicted to run out of money.” Jack VanDerhei, Research Director Employee Benefit Research Institute “Most American households at or near Retirement are consumed by Fear.” Anthony Webb, Associate Director of Research Employee Benefit Research Institute

4 A N UMBERS G AME 18475 224030 1940 2013

5 How Prepared Are We For Retirement? Households entirely dependent on Social Security for retirement: 75% of low-income households 33% of all households One third of Americans aged 45-54 have nothing saved specifically for retirement. Three quarters of near-retirees—those aged 50-64—have annual incomes below $53,000. And….the 50-64 aged average total retirement savings is less than $27,000. Source: Laura Tyson, President’s Council of Economic Advisers, June, 2013.

6 Financial Distress, Health, and The Employer’s Bottom-Line (The HR Professional’s Primary Concern….40% to 50% of Employees say their Health is Negatively Impacted by their Financial Worries!) Absenteeism Job Stress Lowered Morale More Accidents Substance Abuse Loss of Customers Tardiness Reduced Productivity Loss of Sales Revenue Higher Disability Claims Poor use of Work Time Lack of Focus Poor Financial Literacy Leads to Poor Financial Behavior Which has a Negative Effect on the HR Department Source: Bagwell, D.C. & Kim (2003) Journal of Consumer Education, 21, 50-58

7 Employee Personal Finances and the Bottom-line Financially illiterate adults do not manage their personal finances very well. And, they do not save and invest enough for a financially successful retirement. This contributes to lower productivity as well as higher healthcare costs.

8 Employee Personal Finances The metaphor is a 3-legged stool: 1. Social Security 2. Employer provided/sponsored pensions 3. Personal savings USA System of Retirement Income Security

9 Defined-Benefit Retirement Pensions (DB Plan = Monthly checks for life) Most USA workers earn Social Security Administration credits during their working years and retirees are eligible for a SSA pension. Average as of Dec. 2013: $1292 per month In 1983, Employer-sponsored plans represented: 62% of the workers with company-funded pensions 17% of the workers with 401(k) plans By 2013, Employer-sponsored plans represented: 12% of the workers with company-funded pensions 71% of the workers with 401(k) plans Source: SSA and Center for Retirement Research at Boston College (, September, 2014

10 Defined-Contribution Retirement Savings Plans (Defined Contribution Plan = Lump Sum at Retirement to Manage) Only 43% of all workers save for retirement in any DC plan and only 56% of full-time and full-year salaried earners save in any DC plan. Only 59% of full-time earners (or 58 million) have access to employer- sponsored voluntary retirement plans. Only 2 in 3 eligible employees join Defined Contribution plans. Average balance: $72,383 Median balance: $18,433 Source: 2013 United Press International; EBRI Issue Brief E.O.Y 2013, December 2014 A “median” balance means half have saved less!

11 The Tripod of American Economic Security Individual 22% Government 38% Individual 67% Group 25% Government 8% Savings Level 1940 12.3% 2014 4.5% 2014 Group 40% 1940

12 Important Language in the 1974 ERISA Act (information HR personnel should know) The 1974 ERISA legislation was partially designed to promote the idea that: “When properly informed, educated and given reasonable choices, plan participants would make good decisions.” This falls under The Code of Federal Regulations, Title 29, Chapter XXV, part 2550.404c. Specifically, it states that: “Companies that sponsor 401(k) plans need to, among other things, provide their employees with adequate information about 401(k) investing, their plans’ particular 401(k) investments, as well as related matters.” In addition, the Dept. of Labor encourages employers to provide financial education for employees. And, the Government Accountability Office provides a guideline regarding the definition of financial literacy which states: “The ability to understand financial choices, plan for the future, spend wisely, and manage the challenges that come with life events such as job loss, saving for retirement, or a child’s education.”

13 Supreme Court Rules Individual Retirement Plan Participants Can Sue Employers Over 401(k) Losses February 20, 2008 Supreme Court Rules Individual Retirement Plan Participants Can Sue Employers Over 401(k) Losses The Supreme Court has ruled that individual participants in a 401(k) plan can sue their employers over losses, a move that many observers say could result in a deluge of lawsuits for plan sponsors. Until now, plan participants could only sue employers over losses in their 401(k) plans through class-action suits. But in an opinion Wednesday, February 20, the Supreme Court said that under the Employee Retirement Income Security Act, individual employees can sue plans sponsors for losses on behalf of the plan. “This should be a wakeup call to employers,” says Don Stone, president of Plan Sponsor Advisors, a Chicago-based 401(k) consultant. “They need to recognize that as fiduciaries, they have responsibilities and there is going to be a spotlight shined on them.”

14 Future Litigation for Employers? Increasingly sophisticated class action and collective action litigation, combined with aggressive government enforcement, means that employers are apt to face more claims and bigger exposure in future years. Additional trends to note as we move forward: While shareholder and securities class action filings experienced a downtick in 2009, employment-related class action filings increased significantly. Anecdotally, surveys of corporate counsel confirm that workplace litigation – and especially class action and multi- plaintiff lawsuits - continues as the chief exposure driving corporate legal budget expenditures, as well as the type of legal dispute that causes the most concern for their companies. The lesson to draw from the change in law is that plaintiffs’ attorneys and government enforcement lawyers are apt to be equally, if not more, aggressive in future years in bringing class action and collective action litigation against employers. As class actions are a pervasive aspect of litigation in corporate America, defending and defeating this type of litigation is a top priority for management. Therefore, identifying, addressing, and remediating class action vulnerabilities will have a place at the top of management’s priorities list. Source: Seyfarth Shaw’s Sixth Annual Workplace Class Action Litigation Report (01/12/2010)

15 Employees with financial distress report poor health. 1 Financially distressed employees have worse health than other workers. 2 40 to 50% of financially distressed workers report that financial problems caused their health woes. 3 Positive changes in financial behaviors are related to improved health. 4 Research Shows that Health and Personal Finances are Correlated

16 Surveys state: 80% are worried about their personal finances and think financial times will get worse. 60% have trouble making ends meet. 37% have no emergency fund. 10% are delinquent in bills. 4 million have IRS garnishments. 16 million have unpaid utility bills. 15 million receive calls from collectors. Employee Personal Finances

17 One in three workers report that money worries often hamper job performance. 34% of workers rate their financial distress as high to extreme. This includes higher-compensated employees, management personnel, and executives! 5 Virginia Tech Study: Money Stress Strikes Millions of Americans Employee Personal Finances 60% Do Not Save Enough for Retirement and Need Guidance. 40% “May” Save Enough but Still want Greater Financial Knowledge.

18 Employee Personal Finances Retirement Saving Realities Participation in and deferral rates to retirement savings plans are inadequate. Many higher-paid employees are not saving enough for retirement. Workplace education and advice programs have been underutilized. Millions of employees say they cannot afford to save for retirement, and 1 in 4 say credit card debt is a reason. Employees do not know how much they will need for retirement. Employers do not understand the value of providing their employees easy access to the best mix of quality financial programs.

19 The Bottom-Line “Financial Literacy” is knowledge about Budgeting and debt management Risk Management Saving and Investing Tax planning Retirement planning Estate planning …AND, the lack of financial literacy is the major reason why employees do not save enough for retirement.

20 Graph It Out L.E. A95 Today A45 F.I. A65 $4,000/mo S.S. $/mo % Protect/taxes

21 Source: InCharge Education Foundation, National Norms on InCharge Financial Distress/Well-Being Scale © for General Adult Population. 1 Means “Overwhelming Financial Distress/Worst Financial Well-Being”; 10 Means “No Financial Distress/Excellent Financial Well-Being” © Copyright by InCharge Education Foundation and E. Thomas Garman, 2004-2008. All rights reserved. (For more information see (Mean=5.7; SD=2.4) 12345678910 5.4 6.9 8.2 9.2 14.5 14.2 13.8 12.2 11.4 4.2 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Percentage (1-4: 30%) High distress (5-6: 28%) (7-10: 42%) Low distress National Norms for Financial Wellness on PFW Scale ©

22 1. What do you feel is the level of your financial stress today? 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10 2. On the stair steps below, mark (with a circle) how satisfied you are with your present financial situation. The “1” at the bottom of the stair steps represents complete dissatisfaction. The “10” at the top of the stair steps represents complete satisfaction. The more dissatisfied you are, the lower the number you should circle. The more satisfied you are, the higher the number you should circle. 3. How do you feel about your current financial condition? 1 2 3 4 5 6 7 8 9 10 Overwhelming High Low No Stress Stress Stress Stress at All Feel Sometimes Not Feel Overwhelmed Feel Worried Worried Comfortable Personal Financial Well-Being Scale © and Score Interpretation

23 4. How often do you worry about being able to meet normal monthly living expenses? 1 2 3 4 5 6 7 8 9 10 Personal Financial Well-Being Scale © and Score Interpretation - Continued All the time Sometimes Rarely Never 5. How confident are you that you could find the money to pay for a financial emergency that costs about $1,000? 1 2 3 4 5 6 7 8 9 10 No Little Some High Confidence Confidence Confidence Confidence 6. How often does this happen to you? You want to go out to eat, go to a movie, or do something else and don’t go because you cant’ afford to? 1 2 3 4 5 6 7 8 9 10 All the time Sometimes Rarely Never 7. How frequently do you find yourself just getting by financially and living paycheck to paycheck? 1 2 3 4 5 6 7 8 9 10 All the time Sometimes Rarely Never 8. How stressed do you feel about your personal finances in general? 1 2 3 4 5 6 7 8 9 10 Overwhelming High Low No Stress Stress Stress Stress at All

24 1. Find a financial program provider that utilizes non-solicitous Certified Instructors! 2. Insist on a program that provides leadership to deliver a coordinated quality program that emphasizes the basics of personal finance: Spending Plan Insurance planning Credit Management Investing planning Retirement planning Tax planning Estate planning Employee benefits It’s not a matter of money spent on financial education — it’s a matter of effectiveness! How Can Employers Save $750 - $2,000+ per employee?

25 Studies have shown that return on investment for financial wellness training in the workplace is $2.8 to $1 and may be much greater. Studies have shown that return on investment for financial wellness training in the workplace is $2.8 to $1 and may be much greater. These calculations are reasonable estimates. Some numbers are very low estimates, and ABC Company’s Human Resources Department has the most accurate data. Decreases in accidents, workplace violence and theft, and reduced fiduciary liability are additional ROI values that are not part of this ROI calculation, although they could be and would increase the ROI significantly.

26 o Lowers financial distress o Increases financial well-being o Helps to provide better health o Improves retirement preparation o Enhances family relationships o Improves job performance Why Does Quality Financial Education Work?

27 How Can an Employer Bring Financial Well-Being to Employees? Effective financial education Access to credit counseling Benefits information education Retirement education Financial education Financial coaching that changes behavior

28 Highly-compensated Employees Need Financial Education Too Tax Strategies Market Strategies Retirement Strategies Estate Planning Employees with more education and bigger paychecks still have questions; it’s just a different set of questions.

29 How Does All of This Really Help the HR Professional? 1 st Understand fiduciary liability and how to manage its potential impact 2 nd Provide greater value for your employer by doing more than 401(k) provider seminars 3 rd Utilize a list of quality resources for concerned employees 4 th Have different levels of educational resources to meet the diverse needs of your employees 5 th Track your success with employee evaluations and surveys

30 This concludes the HR Certification Institute Continuing Education Presentation.

31 WHERE TO GO FROM HERE Heartland Institute of Financial Education Is a national 501(c)3 nonprofit organization Utilizes non-solicitous CFEd ® Certified Financial Educators ® as instructors Has a mission of providing financial education at the workplace Partners with a consortium of colleges and universities nationwide

32 NEXT STEP Meet with Instructor Schedule classes Evaluate Employee Financial Wellness (optional) Re-evaluate in 6 months (optional)

33 1 Bagwell & Kim, 2008; Drentea, 2000; Drentea & Lavrakas, 2000; Garman et al, 2004; Genco et al., 1999; Garman et al., 2007;l Jacobson et al., 1996; Lyons & Yilmazer, 2005; Kim, Sorhaindo, & Garman, 2004; Prawitz et al., 2007; Shatwell et al, 2007 2 Kim, Sorhaindo, & Garman, 2003; Prawitz et al, 2007; O’Neill et al, 2005 (2 articles); Sorhaindo & Garman, 2002 3 Garman et al, 1999; Kim, Garman, & Sorhaindo, 2003 (AFCPE and ACCI); Kim, Sorhaindo, & Garman, 2004; O’Neill et al, 2006; Weisman, 2002. 4 Kim, Garman, & Sorhaindo, 2003 (AFCPE and ACCI); O’Neill et al, 2006; O’Neill et al, 2005 (2 articles) 5 Virginia Tech University study: “Money Stress Strikes Millions of Americans” Footnotes

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