In 2014, 78 percent of active 401(k) participants who made a change to their plan made a positive one, by either starting or increasing their contributions. Compared to 2013, the number of participants who contributed to their 401(k) account increased by 18 percent, according to the latest Bank of America Corp (NYSE:BAC) Merrill Lynch 401(k) Wellness Scorecard. 1 This growth can be attributed in part to millennials’ increasing focus on savings, as 64 percent more employees in this generation started contributing to a 401(k) account in 2014 compared to 2013.
“As lack of retirement savings continues to make headlines, it is encouraging to see more people taking advantage of employer-offered financial benefits in preparation of their financial future,” said David Tyrie, head of retirement and personal wealth solutions for Bank of America Merrill Lynch. “Employers play an important role, and intuitive plan design strategies can make decision-making about enrollment, levels of contribution rates and investment choices even easier for employees.”
The report also found health savings accounts (HSA) are experiencing tremendous growth, with a 36.7 percent increase in new accounts from 2013 to 2014, as more plan sponsors offering high-deductible health plans also offer HSAs and employees begin to better understand the tax-advantaged vehicle as a way to save for qualified medical expenses now and in the future.
Employees responding to simplified design and automated features
With employers increasingly embracing the opportunity to help employees make more informed financial decisions, plan sponsors are looking to streamline and simplify the enrollment process. In response, Bank of America Merrill Lynch launched an Express Enrollment program, which minimizes the upfront choices employees must make to enroll. In 2014, employers increased their adoption of Express Enrollment by 119 percent. Employees are embracing the simplified enrollment process as evident by their participation rates. Seventy-nine percent of employees enroll after entering through Express Enrollment, compared to 55 percent of those who enter through a traditional path.
Other examples of simplification that lead to increases in participation include:
- During 2014, 64 percent of 401(k) plans combined auto enrollment and auto increase, representing a 25 percent increase compared to one year earlier.
- As a result of these automatic features, this past year saw 32 percent higher participation rates for plans offering auto enrollment, and 46 percent more employees scheduling automatic increases.
- We continue to see a strong correlation between increasing retirement contributions and annual health care enrollment. In the second half of 2014, the report found a 104 percent increase in positive actions among new enrollees in comparison to the first half of the year, and a 98 percent increase in positive actions during the same time period.
Increasing interest in tools and resources to manage financial lives
Trends revealed throughout this report are consistent with insights garnered from Bank of America Merrill Lynch’s recent Workplace Benefits Report, which found the overwhelming majority of employers (83 percent) feel a sense of responsibility for employees’ financial wellness and are tailoring financial education offerings to better meet the needs of their employees.2
Employees are taking more advantage of the financial education that is being offered to them. Meetings with Merrill Lynch educational specialists increased by 14 percent year over year, and the Retirement Education Services phone center offering employees consultation and support has experienced a 17.6 percent increase in calls over the same period.
Employers offering Advice Access3, a professional saving and investment advice service tailored to the employee’s individual situation, has increased 6 percent year over year. Ninety-one percent of employees enrolled in Advice Access are using the managed account feature, PersonalManager, a managed account solution with investment management, periodic reallocation, and rebalancing features.
Employees are engaging with financial benefits in ways that match their on-the-go lifestyle. Mobile access is becoming essential to benefit offerings, with a 46 percent year-over-year increase in visits to Merrill Lynch’s Benefits OnLine mobile site. Additionally, visits to our online Education Center have increased by 15 percent.
This semiannual report reveals trends in the behaviors of 2.5 million employees at companies with financial benefit plans serviced by Bank of America Merrill Lynch. To access the Bank of America Merrill Lynch 401(k) Wellness Scorecard, click here.
1 401(k) Wellness Scorecard is based on the Bank of America Merrill Lynch proprietary 401(k) business, which comprises $128.9 billion in total client plan assets and 2.5 million total plan participants as of December 31, 2014. Source: Bank of America Merrill Lynch’s Retirement and Benefit Plan Services (Retirement and Benefit Plan Services) is part of Global Wealth and Investment Management (GWIM), the wealth and investment management division of Bank of America Corporation. As of December 31, 2014, Retirement and Benefit Plan Services had client balances of $128.9 billion. Client Balances consists of assets under management, client brokerage assets and deposits of GWIM retirement plan participants held at Bank of America, N.A. and affiliated banks.
2 Bank of America Merrill Lynch 2015 Workplace Benefits Report
3 The Advice Access service uses a probabilistic approach to determine the likelihood that participants in the service may be able to achieve their stated goals and/or to identify a range of potential wealth outcomes that could be realized. Additionally, the recommendations provided by Advice Access do not consider an individual’s comfort level with investment risk, and may include a higher level of investment risk than a participant may be personally comfortable with. Participants are strongly advised to consider their personal goals, overall risk tolerance, and retirement horizon before accepting any recommendations made by Advice Access. Participants should carefully review the explanation of the methodology used, including key assumptions and limitations, which is provided in the Advice Access disclosure statement. It can be obtained through Benefits OnLine or through your Bank of America Merrill Lynch representative.
IMPORTANT: The projections or other information shown in the Advice Access service regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. Investment advice provided to participants relative to plan assets is solely through Advice Access. (Original Source)