Data & Research April 2, 2014

Positive 401(k) Behaviors Picking Up

Workers who made changes to their 401(k) accounts last year took a positive step 76% percent of the time, according to a recent analysis.
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The rate of positive decisionmaking was even higher, at 83%, during the fourth quarter of 2013, according to the latest release of the Bank of America Merrill Lynch 401(k) Wellness Scorecard, which identifies and examines trends within the firm’s book of retirement plan business. Examples of positive steps include such actions as establishing a 401(k) account or increasing deferral rates. Other positive steps include setting age-appropriate asset allocations or running an income needs calculation.

The 83% rate for positive actions observed in the fourth quarter of 2013 represents a three-year high, according to the report. The yearly rate of 76% represents a 3% increase in positive decisionmaking over levels measured in 2012.

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Other major trends observed by the BofA Merrill Lynch 401(k) Wellness Scorecard include the following:

  • Healthy uptick in HSA usage. Health Savings Account (HSA) usage grew significantly in 2013. With rising health care costs and a growing number of employers offering HSAs alongside high-deductible health plans, more and more workers are utilizing these tax-advantaged vehicles to prepare for both near- and long-term medical expenses.
  • The mobile benefits frontier. The number of mobile visitors to benefit plan platforms supported by BofA Merrill Lunch doubled in 2013, according to the report.
  • More making it automatic. The number of 401(k) plan sponsors adopting automatic enrollment increased 16% in 2013, while the adoption of automatic annual deferral increases grew 25%. BofA Merrill Lynch also observed a 20% increase in the number of plans using both auto-enroll and auto-escalation features.

Employers also continued to seek proactive ways to help their employees achieve retirement goals and improve overall financial wellness, the report suggests. For example, 401(k) plan sponsor adoption of advice services increased 14% during 2013.

“During the last few years, it has been encouraging to see companies increasingly use intuitive plan design strategies and other services to make their 401(k) plans more accessible and easy to use,” says Kevin Crain, senior relationship executive for BofA Merrill Lynch. “When combined with simplified employee decisionmaking around enrollment, contributions and wise investing, employers can truly help drive better outcomes for their workforces.”

To access the Bank of America Merrill Lynch 401(k) Wellness Scorecard, click here.

Data & Research April 2, 2014

Employees Could Use More Financial Education

Sixty-eight percent of employers offer some kind of financial education for employees, a survey found.
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Preliminary results of a new survey from the International Foundation of Employee Benefit Plans indicate there is room for improvement in the type of financial education employers offer. Half of all organizations offer benefits literacy education and nearly half offer retirement security education, but only about one-quarter offer financial literacy education.

More than one-third of organizations offering financial education have just started offering this education in the past five years, and half of organizations surveyed have experienced an increase in demand from employees/participants for financial education in the last five years.

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According to the survey, nearly two in five respondents feel a responsibility to educate employees about pension and benefit options, encourage workers’ retirement savings and help participants become financially literate managers of their own money. Nearly two in five feel their responsibility is only to educate about pension and benefit options and encourage retirement savings, and about one in five feels their responsibility is only to educate about pension and benefit options. Fewer than 5% feel no responsibility to educate about retirement benefits or financial matters at all.

Among organizations offering financial education, the three most common education topics are retirement plan benefits, investments and savings. About one-quarter of organizations providing financial education have assessed which financial education topics are needed most by their populations, and about half are considering doing so.

Survey respondents regard voluntary classes/workshops and free personal consultation services as the most effective ways to provide financial education to employees/participants. Additionally, respondents rate one-on-one in-person meetings as considerably more effective than larger group meetings or one-on-one online/phone meetings.

“There is an obvious need for employees to become better acquainted with their finances and prospects for retirement,” says Julie Stich, director of research at the Foundation. “The survey found that only 18% of employers consider their average employee at retirement age to be very or extremely prepared for retirement. Offering educational opportunities to participants is a way for employers to give their employees the tools and confidence to plan for their retirement.”

In February 2014, the International Foundation surveyed member organizations across the United States and Canada about the various types of retirement and financial education offerings they provide to their employees and participants. In total, 397 responses were received (310 from the United States and 87 from Canada).

Additional preliminary findings from the survey can be found in the report, Financial Education for Today’s Workforce: 2014 Survey Results, available at www.ifebp.org/financialeducation. A full report with all findings will be released later this year.

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