Client Service July 26, 2017

Bank of America Merrill Lynch Finds Participants More Engaged in Plans

Robust plan design, education and the use of digital tools can increase employee engagement with their retirement plans, the firm's Plan Wellness Scorecard shows.
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Employers are making it easier for employees to take more control of their finances by continuing to simplify retirement plan design and expanding the savings solutions they offer to include Roth 401(k)s and health savings accounts (HSAs), according to the latest Bank of America Merrill Lynch Plan Wellness Scorecard. 

“Backed by the financial wellness solutions of Bank of America Merrill Lynch, employers are able to give employees access to the financial help they want and establish a culture of financial wellness. This engagement growth has also been driven in part by employers making education more accessible with onsite meetings, webcasts and personal consultations,” the company says. 

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Among Bank of America Merrill Lynch’s proprietary 401(k) business, the last year has seen a 6% increase in new enrollments, a 17% increase in plan assets, a 20% increase in contributions and an 18% increase in deferral rate changes. The majority of employees in every age group actively contribute to their 401(k) accounts, with younger employees slightly more likely to contribute—82% of Millennials made a contribution, as did 77% of Gen X and 75% of Baby Boomers. 

Nearly two-thirds of employees say their employer has been at least somewhat influential in getting them to save for retirement. Employers that are looking to help their employees save more for retirement and establish a culture of wellness in the workplace are embracing simplified plan features. Auto-increase has become very popular, showing a 24% year-over-year adoption growth rate and a 172% increase since 2012. 

The Scorecard finds that the higher the automatic enrollment default rate, the higher the levels of employee participation in their 401(k) plan. The overall participation rate at a 3% auto-enrollment rate is 80%, while the participation rate at a 6% default rate is 83%. 

NEXT: Increased mobile usage, Roth accounts and HSAs

 

In addition to simplified plan design, website and mobile access to Bank of America Merrill Lynch’s Benefits OnLine has seen increased usage. In the past year, there has been a 10% increase in website visits and a 14% increase in the use of mobile sessions. And, when employees access their account, they are doing more than just checking balances: 16% are using express enrollment for voluntary enrollment, 13% are using digital to make beneficiary changes, and 8% are using it for contribution rate changes.

Among the 57% of plans that offer Roth accounts, Roth contributions increased 25% versus 16% for pre-tax contributions. In addition, the number of employees contributing to Roth accounts increased by 31%.

Beyond looking just at saving for retirement, employees are also looking for ways to save for their health care expenses, today and in the future. Employees are increasingly using HSAs to put aside pre-tax dollars to help cover their medical costs. The Scorecard found a 21% increase in the number of employees contributing to HSAs and a 36% increase in HSA balances.

In addition, 70% of contributions to HSAs are bring used during the year, leaving 30% to remain in the accounts for future health care expenses.

The latest Plan Wellness Scorecard can be downloaded from http://www.benefitplans.baml.com/IR/pages/digitalscorecard.aspx.
In Practice July 26, 2017

DOL Fiduciary RFI Process Extends a Decade of Uncertainty

The head of retirement and investment solutions at Pershing discusses the impact that uncertainty around the fiduciary rule is having on firms and clients throughout the DC plan industry. 
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Rob Cirrotti, managing director and head of retirement and investment solutions at Pershing LLC, is leading the company’s efforts to help registered investment advisers (RIAs) and broker/dealers comply with the Department of Labor’s expanding fiduciary rule.

The DOL rulemaking remains an incredibly divisive and unpredictable topic, Cirrotti says, despite literally a decade of debate and discussion among regulators and providers striving to find a workable middle ground.  

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“We have been spending a lot of energy as a firm on making sure our advisory clients have what they need as it relates to fiduciary rule compliance,” he tells PLANADVISER. “What we have clearly heard from clients is that, for many of them, this is going to be a pretty dramatic change in how they run their business and do their compliance efforts, especially if the rulemaking is fully implemented on such an aggressive schedule. It’s no surprise, then, to see that they are very closely watching the latest, possibly final, request for information process opened up by the DOL under President Trump on this issue.”

Cirrotti has found “a pretty wide range of views on the matter” within the book of business.

“Part of that stems from the fact that we serve both RIAs and the broker/dealers,” he explains. “The B/Ds range across many different sizes and segments, and on the RIA side that is true as well. So there are different perspectives on the rule. I would say that the B/D community is naturally more concerned about getting more time to comply with the impacts of the rule—it’s more dramatic for them given their business models.”

The independent RIA community Pershing serves is more prepared, generally.

“Both on the RIA side and the B/D side, our clients are all making good faith efforts to deal with the uncertainty surrounding this issue and get to a place where they feel good about compliance under the Employee Retirement Income Security Act (ERISA),” Cirrotti adds. “It is still far from settled, we believe, what the final requirements will be and what the path of compliance will ultimately look like. It is hard to understand right now exactly what the environment will look like from the strategic and tactical perspective.”

At a very high level the RIAs are more capable of embracing the flat fee-for-service model that seems to be favored by the DOL, he says. Many of them are already working in that capacity for some or all of their clients.

“Certain RIAs already feel very passionate and committed to upholding the fiduciary standard as part of their core value proposition. Interestingly, however, some RIA firms are actually against the new fiduciary requirements because they feel their current willingness to take on fiduciary status sets them apart in the eyes of clients,” Cirrotti explains. “So once again, opinions continue to vary on the issue.”

Cirrotti concludes that the uncertainty surrounding the fiduciary rule’s future will continue for quite some time. It is still unclear how DOL will ultimate act, he notes, and there is indication that the Securities and Exchange Commission may soon get involved in the fiduciary reform effort and attempt to create harmonization across the defined contribution plan and individual retirement account advisory markets in a different way.

“Frankly the industry seems to be suffering some DOL fatigue,” he says. “The reality of what clients really want to be focused on is the dialog around how to transform their retirement advisory business for the future. The DOL rule is part of that, but it has to be a wider conversation about the role of in-person advice versus robo-advice. How do we groom the next generation of advisers and brokers? In what way scan we improve our operating models to maximize efficiency and leverage scalable technology and big data? How do we best facilitate oversight of the business the advisers in the field are doing?”  

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