Editor’s note: This is the second of two parts exploring how employers can modify their benefits strategies to attract and retain members of Generation Z, the youngest generation in the workforce. Read the first installment here.
As the ranks of Generation Z grow in the workforce, employers are tasked with rethinking their approaches to the types of benefits they offer and how they communicate those offerings. This article looks at new options for financial benefits and how employers can help their Gen Z workers find information on benefits.
Support Financial Wellness
Financial security is unfamiliar territory for many Gen Z workers. Consider the following:
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The 2008 financial crisis and the Great Recession led to the loss of jobs and homes for the parents of many members of Gen Z.
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The COVID-19 pandemic, which began in 2020, dealt a harsh blow to the economy as some Gen Zers were just starting out in their careers.
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The widespread inflation and wage stagnation of recent years has hurt the purchasing power of members of Generation Z and millions of others.
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Student loan payments returned in October 2023 after a three-year hiatus, which meant that some Gen Z workers had to begin paying or repaying student loans, often facing five- and six-figure loan balances.
Those who have not experienced financial wellness in adulthood are less likely to understand how to achieve it. By helping Gen Z workers establish financial security, employers can establish the type of employment relationship that keeps younger workers engaged and dedicated to their employers.
New options for financial benefits have arisen in recent years that have flown under the radar for many employers. As part of COVID-19 pandemic relief funding in early 2020, Congress temporarily expanded the definition of qualified educational expenses under Section 127 of the Internal Revenue Code to include payments on principal and interest for student loan repayment. This means that through a qualified educational assistance program, employers can contribute up to $5,250 per employee, per year toward student loan repayment through January 1, 2026. Employers that already offer an educational assistance plan can add this option to an existing plan through a plan amendment, while employers new to this benefit can establish a plan to help employees fund both current educational expenses and reduce the burden of student loans.
An option for student loan assistance that is new in 2024 comes from SECURE 2.0, which permits retirement plans to treat an employee’s student loan payments as retirement plan contributions for purposes of employer matching. This is a double benefit as it both incentivizes the paying off of student loans and allows young workers to begin saving for retirement as early as possible, without decreasing their take-home pay to do so. In fact, many provisions of the 2022 SECURE 2.0 Act are particularly well-suited for Gen Z workers, such as auto-enrollment to encourage savings from the beginning of eligibility, and increased options for hardship and emergency withdrawals, which allow savings for both retirement and emergency funds at the same time. See our article SECURE Act 2.0: Key Points for Employers to Know for more information.
Many employees with a retirement plan through their employer already have a financial wellness benefit that they aren’t aware of in the form of their retirement plan provider. Many financial institutions and third-party administrators that manage retirement plans have services that are free to employees for matters such as financial planning, help understanding investment options, and financial wellness education. These resources are often bundled into plan administration fees, and available at no additional cost to the employer.
The only action an employer needs to take is connecting these services to the employees who would benefit from them. Of course, this begs an evergreen question: How do we communicate with employees about their benefits?
Provide New Channels of Access
Getting information about benefits into the hands of the youngest generation of workers has always been a critical role for employers, as each generation of young professionals learns the mechanics of health insurance, time-off accruals, and retirement savings from their first employer. Remember, the Gen Z cohort was born in the late 1990s through early 2010s, meaning that many of them are still young enough to be covered as a dependent on their parents’ health insurance.
As the first generation to come of age in a post-Google world, Gen Z workers are accustomed to having all the information they need at their fingertips. Outdated benefits guides or difficult-to-navigate document hubs are significant obstacles to getting critical benefits information into the hands of these employees. Other traditional channels to avoid are hardcopy enrollment forms and websites that are not mobile-friendly.
Gen Z workers are accustomed to accessing information and resources on demand, often through search engines and mobile applications. Thus, employers should leverage technology to provide convenient, ongoing access to benefits information.
As part of the vendor selection process, inquire about mobile apps and the mobile responsiveness of the participant portal website. Look for vendors that provide instant support, like a searchable knowledge base or 24/7 chat. These are the methods by which younger employees are most likely to seek information on benefits. During open enrollment, pre-record videos and publish FAQs so that all employees have access to the information. Doing so increases accessibility not only for Gen Z employees, but also for offsite employees, second- and third-shift workers, and those who want to review the materials at home with their covered dependents.
If there is a benefits guide, make sure it outlines all benefits and is updated at least annually to reflect the current benefits available to employees. A thorough benefits guide should be organized by benefit type, with information on participation eligibility rules, enrollment processes and timelines, cost sharing where applicable, information on the plan vendor where applicable, and current contact information for the benefit administrator. Keep the most recent version of the document in a place where employees go regularly, such as the payroll and timekeeping system or an intranet document hub. Keep the benefits guide at the top, rather than nested deep within subfolders, so that employees can quickly find and refer to it when needed.
By understanding and addressing the unique needs of Gen Z employees, employers can continue to develop exceptional workplaces that attract, retain, and empower this valuable segment of the workforce. If you have any questions about how to craft or revise a benefits strategy, please email the Employers Council Member Experience Team.