Even as market uncertainty persists, employees using Bank of America Merrill Lynch's automatic 401(k) savings plans are showing they want to stay the course when it comes to positive savings behavior, according to the firm's latest quarterly data.
The results come in the latest 401(k) Wellness Scorecard released by the firm this week that details its second quarter results. The report provides a look at how the $94 billion in client plan assets and 2.54 million plan participants with balances fared in the last three months.
In the second quarter, more than 142,000 employees began or increased their contributions to their retirement plans, moving the number of employees taking those actions to date this year to 350,000. That pace is down from the first quarter, when more than 297,000 employees started or increased their 401(k) savings.
The results support Bank of America's new model it is promoting to its plan sponsor clients, executives said Monday, which includes a trio of enrollment features including auto enrollment, auto increase and advice access. The goal is that these features, when offered together, will reduce the action necessary for employees to begin and increase saving, while also offering targeted advice on their retirement outlook.
Compared to last year, more employers have adopted those programs and services, the report shows. The greatest participation increase has been for auto increase, with a 16% rise in plans offering that feature, follows by an 8% increase in use of advice access and 7% increase in auto enrollment.
Currently, 10% of the plans are using all three features, up from 7% one year ago. That usage has the potential to go "higher and higher," according to Kevin Crain, head of Institutional Retirement and Benefit Services at Bank of America Merrill Lynch.
The firm's financial advisor force has had a direct role in working to boost engagement across all three offerings, Crain says. That includes urging plan sponsor clients to auto enroll all eligible employees and not just new hires, as well as boosting their auto enroll deferral rate to a targeted 4% to 6% from 3%. It also means making sure those same clients provide auto increase and its advice services to those employees.
"We think the greatest health packaging would be auto enroll, auto increase and advice together," Crain said. "If a plan utilizes those three features, there's no excuse why that plan isn't well and the employees aren't well."
To help bring that point home, the firm's advisors will soon have a new white paper-detailing the advantages of all three plan features-to show to clients in the next two weeks.
Some of the second quarter results also show that by making the decisions automatic for employees, while providing advice services, they are more likely to engage in positive retirement savings behavior, according to Michael Liersch, director of behavioral finance at Merrill Lynch.
Employees using the firm's advice access services, in particular, were less likely to be concentrated in a specific asset category, to not use target date or asset allocation funds correctly, to be concentrated in one company stock or not contribute at all.
At the same time, more than 52% of participants enrolled in the advice services provide more data to inform the guidance they receive. And more than 530,000 have signed up to receive electronic education materials about their retirement plan options.
"We see that employees are more interested than ever in understanding the ways in which they can make the best investment decisions to get them where they want to go," Liersch said. "These participants are really continuing to increase their amount of savings or [are] willing to start saving now, despite the uncertainty."
Click here for a full copy of Bank of America Merrill Lynch's 401(k) scorecard.
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