Financial Wellness Effect on Human Capital

Finding a return on investment (ROI) for a wellness program, whether it be health or financially focused, is a difficult task. Reasons include:

  • Time and resources
  • Delay in reaping a return
  • Sometimes the measure is a cost avoidance, where it is difficult to measure change
  • Difficulty assigning a value to soft costs
  • Virtually impossible to pinpoint a cause of reduced claims.

An alternative way to measure wellness plans is value on investment (VOI). ROI can cause constituents to lock in, expecting a hard number such as lower claims cost. VOI looks more holistically at the benefits of a wellness plan.

The “softer” costs are difficult to measure. Not many studies exist that assign a dollar value to soft costs around wellness programs. One that does is from Financial Finesse via the Society of Actuaries. The study assigns dollars to some of the human capital components to provide a path from VOI to ROI.

The model is based on improvements in employee financial wellness, measured on a scale of 0-10, with 10 being the most prepared. Most employees fall in the 4 to 6 range. The improvement from a score of 4 to 6 is valued in wage garnishments, absenteeism, and utilization of flexible spending accounts (FSAs) and health savings accounts (HSAs).


Finding ROI of financial wellness programs is hard. An alternative way to measure is VOI-value of investment.

For every increment in a financial wellness score, there is a decrease in likelihood of garnishments. For example, the likelihood of garnishment fell from 4.8% to 1.8% when moving from a financial wellness score of 4 to 6.

In a similar move in wellness scoring, unplanned absences decrease roughly three hours. Employees don’t need to miss work unexpectedly to take care of financial issues.

Contributions to spending accounts like FSAs and HSAs increase when a move from 4 to 6 in financial wellness occurs. Contributions to these accounts are not subject to Federal Insurance Contributions Act (FICA) tax, hence employer savings.

After using some financial assumptions, the above would save a 5,000-employee company:

Garnishments $44,000
Absenteeism $426,000
FSAs and HSAs $89,000
Total $559,000

As referenced in my previous post, The Toll of Financial Stress on Health, financial stress causes increased health costs. The effect of an incremental increase in financial wellness score on healthcare costs has not been verified, and would be very difficult to measure.

As employees become more financially well, their contributions to company retirement plans increase. Financial Finesse research found that employees who engaged repeatedly in their employer’s financial wellness program increased their likelihood of being on track for retirement—from 34% to 47%. From my own experience, each employee who delays retirement for one year, on average, costs an employer $30,000 in income and healthcare expenses. The improvement in financial wellness could realize savings of nearly $600,000 per year based on employees being one year more financially prepared to retire.

Employees tend to leave companies when they don’t have an appreciation of their benefit plans and total compensation. Financial wellness plans improve turnover rates as well. After factoring in a couple of assumptions, a 5,000-employee company could save $225,000.

So, from the above figures across human capital, an effective financial wellness plan can save a 5,000-employee company roughly $1,384,000. This figure does not include healthcare costs, as mentioned.

Here’s the bottom line. Using a combination of actual financial wellness data (with studies and statistics) and applying them to an employee base has reasonably estimated the effect financial wellness has on human capital and the potential savings found therein.

“Each employee who delays retirement for one year, on average, costs an employer $30,000 in income and healthcare expenses.” – Brandon Conroy, Innovu Practice Director, Retirement Analytics
Brandon Conroy

Brandon Conroy

Brandon Conroy, ASA, FCA, MAAA, is a leader in developing and implementing new tools and strategies that reduce client risk. He’s developed and implemented an interactive healthcare cost projection model, underwriting templates, renewal presentations, IBNR tools, a health plan chooser tool, and financial wellness education models. Brandon left Innovu in February 2019 to pursue other interests.

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