Savings beget savings for businesses, workers

More than 20 of Minnesota's big employers have pledged to increase retirement plan participation among their employees. The hope: that improving financial literacy and security among employees will be beneficial to everyone -- including the employers.

The initiative, to be announced today, was created by the Itasca Project, an alliance of more than 40 Minnesota chief executives and elected officials dedicated to addressing economic and quality-of-life issues in the state.

For more than a year, the group has been laboring over how to make its imprint on improving financial literacy. Its answer, which Itasca is calling Financially Fit Minnesota, includes having Travelers Companies, Best Buy, Supervalu, Deluxe Corp., HealthPartners, and Pentair change their retirement savings programs so eligible employees are automatically enrolled.

The idea is to make it harder for workers to pass up free matching money in their 401(k) plans. Companies are targeting workers who don't typically save, such as young employees and hourly workers.

Having financially secure employees is good for business. Up to 20 percent of employees have financial problems so severe that they cause productivity declines, according to the Federal Reserve. Such employees spend an average of 20 hours while at work per month on financial repair.

If all Twin Cities employees used direct deposit, it would save employees $58 million per year in payday lending and check cashing fees and employers $21 million per year in processing, according to Itasca. If each person in the Twin Cities saved $1,000 per year with a 50 percent match, that would amount to $900 million per year toward a more secure retirement.

However, many employers don't offer retirement accounts, let alone matching money.

Research from the Retirement Security Project in Washington D.C. found that 40 percent of Minnesota workers, or 1.2 million, lack access to an employer-sponsored retirement plan.

Brad Anderson, CEO of Best Buy and chairman of the Itasca Project's Financial Literacy Task Force, admits that saving for retirement was far from his mind when he started selling stereos for what eventually became Best Buy.

Today Anderson wants workers to learn what it took him years to figure out -- that the sooner you start saving for retirement, the better.

Anderson shared his views on business' role in employee financial education and health on Tuesday.

Q Why do you think business has a role to play in educating Americans about money matters?

A Business has a degree of expertise because we do assemble and hopefully create wealth. A lot of the folks that we wanted to try to help influence or at least make them aware of different options work for people that were in the Itasca Project. Oftentimes we are the employer and we have programs that are relevant already in a lot of the companies that could potentially be refocused around this particular issue.

Q How did you decide to focus on retirement?

A Beginning to build up assets opens up options for people and families. Retirement savings fit into this because it builds assets for the family, and a lot of firms offer incentives where we actually give you additional money when you put money into a retirement fund. So you lever the amount of money by increasing it and giving it the opportunity to grow.

In many cases, a relatively small percentage of people were taking advantage of these programs. How could we actually get real financial leverage at a young enough stage in their lives so they can begin to build up financial assets?

Q What has Best Buy been doing to educate its own workers?

A We've had a 401(k) program with company match and have had relatively low rates of participation at the stores where we have a very young workforce. Forty-three percent of our eligible employees participate in our 401(k).

This year we're going to have people opt out of the program. Otherwise they'll be automatically enrolled. We're pretty sure that will drastically increase the percentage of people who will enroll. For the company, that means we'll spend a lot more money in our matching to the tune of tens of millions of dollars. That will be an expense, but the positive side is that money will be in the savings accounts of our employees.

Q Do you think companies have a responsibility to increase enrollment because defined benefit plans, such as pensions, are on the decline?

A I think all of us have an enormous vested interest in the welfare of our employees first and our community second.

Q Do companies have an obligation to promote financial literacy to customers?

A You have to have a degree of permission to talk to somebody about issues like this. I think we can have a discussion about what we think the kinds of offers [credit-card offers, or financing deals] and what they bring to the communities on the macro sense, but with the customer it's hard to get into a micro discussion.

Q What will it take to improve America's financial literacy?

A It isn't just individuals making bad choices. We obviously have institutions making bad choices for individuals. I've talked to people in the current mortgage crisis who were giving loans to people who couldn't pay. I think we'll have a richer dialogue, unfortunately, because of some of the problems we've created.

Q Ideally, who should teach financial literacy?

A I certainly got through a fairly substantial education without any real financial literacy. I think we haven't really done a good job of teaching how our economy actually functions.

Kara McGuire • 612-673-7293 For more information about Financially Fit Minnesota: www.financiallyfitmn.org