Bank of America Merrill Lynch’s 2017 Plan Wellness Scorecard, an annual report on trends in financial wellness and retirement planning based on the behavior of plan participants and sponsors in the financial firm’s 401(k) business, shows that US employees’ engagement with their employer-sponsored retirement plans increased last year. Among the report’s key findings is a significant growth in the use of Roth 401(k)s, Patty Kujawa observes at Workforce, with nearly a third of employees who have access to a Roth 401(k) increasing their contributions last year—half of them millennials:
Sylvie Feist, BofA Merrill Lynch’s director of financial wellness strategy, said employers are adopting a broader perspective helping their workers gain confidence in making money decisions. They are simplifying plans by using express enrollment, automatic features and by offering more ways to save. According to the survey, 57 percent of employers who offer a traditional 401(k) also offer the Roth option. In addition, the Roth option recently became a one-click and done selection in BofA Merrill Lynch’s Advice Access online advisory service tool.
The Plan Wellness Scorecard also found that more employers are offering health savings accounts and more employees are using them: The number of employees using HSAs increased 21 percent, and HSA balances grew by an average of 36 percent.
The average employee with an HSA used 70 percent of their contributions for health care expenditures during the year, and saved the other 30 percent for future expenses. This suggests that employees understand the advantage of using an HSA as a long-term savings tool, but are still mostly using them to cover health care costs rather than taking advantage of their preferential tax treatment to use them as investment vehicles.
The report also shows that auto-enrollment is increasingly popular among employers and showing results, with 49 percent of all plans including the auto-enrollment feature. Overall, the adoption of auto-enrollment, auto-increase, and Bank of America Merrill Lynch’s Express Enrollment feature, which offers employees simplified up-front choices about plan contributions, increased by 153 percent in 2016. As previous research has suggested, these automatic “nudges” are encouraging employees to save more: 97 percent of auto-enrolled employees don’t opt out, and the higher the default rate, the higher the level of employee participation in their plan.