Improving Public Employees' Financial Literacy

A March 2011 survey by the Employee Benefit Research Institute found that a majority of Americans have less than $25,000 saved or invested for retirement. In North Carolina, more than half of its active employees do not take advantage of supplemental retirement income programs. With more North Carolina employees retiring -- a 16 percent increase from 2009 to 2010 -- state and local employees could be missing out on opportunities for a more secure financial future.

North Carolina's State Treasurer Janet Cowell is concerned with the struggles employees face not only preparing for retirement, but for any situation that could put someone at financial risk. After hearing stories, including that of a state employee who missed the deadline for short-term disability because he did not understand the paperwork and was presented with incomplete information, Cowell embraced educating government employees on the financial tools and options the state offers. She's working with her financial literacy director to make employee benefits information easier to find, understand and use. And if the treasurer senses more employee interest on a particular financial topic, the department will partner with outside organizations to help present that information.

I recently spoke with Cowell to find out more about her efforts and the importance of financial literacy in this edited transcript:

Why is financial education important for government employees?

There is an increasing number of options for public employees and a complexity that comes with that, even if it's anchored in a defined benefit plan. In North Carolina, we now have the 401(k) and 457 [deferred contribution] programs, and there are choices on how to maximize benefits and make choices that make sense. There are a lot of people who still need better communication on their options and tools to help them make some of these decisions.

How did you recognize the need for financial education for public employees?

Recently, a gentleman came in [to the Board of Trustees] who had retired and had become disabled. He hadn't understood that there was a short-term disability plan run by the state. It really hit me as a case of somebody who was unable to read through a lot of fine print. He had relied on the human resources director and that person did not give him the full information on benefits. He had missed the deadline to apply for short-term disability.

In another case, we were doing a local government financial literacy tour. There are 403(b) retirement plans that are not centralized, and each school district makes a decision on what plan to offer. One district has 17 plans. It was not clear what the process was to select the vendors, what the oversight was or what the fees were. As treasurer, you find that there is a lot of complexity out there and you realize there are ways to improve the system.

What are your current plans for offering financial literacy education?

I wouldn't underestimate the newsletters state government offers. We have spent a lot of time trying to improve the language and content to produce a hard copy that explains benefits -- one for active employees and one for retired employees. That may not be the sexiest example, but it is a fundamental building block. We have increased our online efforts, and we're redoing our whole internet presence. We're trying to find out what employees are looking for and make it more [user-friendly] and need-based in how the information is organized.

We're doing more "lunch and learn" financial meetings. We have a lot of single parents, people who are clearly trying to make ends meet. We're trying to find out what their day-to-day challenges are and see what we can do to be more supportive as a workplace. One course we'll offer is called "Surviving Summer Break: Are Your Kids Eating You Out of House and Home?" This covers topics like: How do you pay for summer camp? How do you do it in a way that doesn't break the bank?

Have you relied solely on internal employees to present the financial literacy information?

We're doing a lot of partnering. We're working with the state employee credit union, because financial questions about [retirement options] go beyond what our call center is used to doing. In this case, there is a secondary level of financial literacy involved, which is, "Is this the right thing for you to do?" While we can't give advice, we are helping educate employees on the things they should consider. The credit union can help us with that, and it is working well.

We have a lot of state employees that are fairly low income and can get tax credits. Our financial literacy director ... helped us partner with community groups like churches to distribute information. We look for these partnership opportunities to expand our reach into the state employee population.

What feedback have you received from those in your office or other state agencies?

They feel like it's a little easier to understand the information we distribute. There are still challenges especially as we continue to cut costs. There's less money to do direct mail. We do online benefits statements, but we have a challenge reaching those in the field or agriculture department. How do you still provide access to these tools and documents when [these employees] aren't in front of a computer all of the time?

What are some of your future goals for the program?

I'd like to have an indicator of retirement readiness, so you can see how many maximize their benefits or how many made errors that negatively impacted them. When you have 850,000 people in your system, you have to start with trial runs. We're working with the financial planners association to see if they can take on one school district to [offer] one-to-one counseling and find out how teachers take advantage of their benefits. You'd like to see whether more people are putting part of their paycheck into a savings/investment program.