Employers getting more proactive in helping plan participants improve financial wellness
U.S. employees have been accentuating the positive and working on eliminating the negative I their 401(k) plans, according to the most recent 401(k) Wellnesss Scorecard compiled by Bank of America Merrill Lynch.
Among employees who took action in their 401(k) retirement plan during the fourth quarter last year, 81 percent took a positive action, such as starting or increasing contributions. These actions, which occurred during the presidential election and fiscal cliff uncertainty, represent a two-year high, Bank of America Merrill Lynch reported.
In another positive finding, more than 90 percent of 401(k) participants who were automatically enrolled were still actively contributing to their plans at the end of 2012. In addition, total 401(k) hardship and in-service withdrawals dropped nearly 8 percent year-over-year.
Sixty-two percent of 401(k) participants rank retirement second only to receiving a financial windfall as a situation that would compel them to reach out to their financial advisor, according to a February survey of Affluent investors conducted by Millionaire Corner. In comparison, about 30 percent of those without a 401(k) said they were motivated to contact their financial advisor regarding retirement.
Nearly half (47 percent) of 401(k) participants we surveyed said their financial advisor had helped them in the past year regarding their retirement plan. This is second only to reallocating assets, which was the most cited way in which these retirement plan participants had been helped by the financial advisors.
The 401(k) Wellness Scorecard measures quarter-over-quarter and year-over-year trends in plan participant behavbiors, along with employers’ adoption of 401(k) design features in plans serviced by Bank of America Merrill Lynch.
Employers, too, received high marks on the Scorecard. As of the beginning of the year, 52 percent of plan sponsors who use automatic enrollment are now also using automatic increase in their 401(k) plans. Plan sponsor use of auto increase rose 17 percent over the previous year.
Last year, 30 percent more employers requested employee meetings and seminars, while 22 percent more employees took advantage of these educational services.
“While it can be difficult for employees to improve their retirement savings and investing behaviors, employers can play an important role in fostering an environment that aids such positive change, said Michael Liersch, director of Behavioral Finance for Bank of America Merrill Lynch in a statement. “Through targeted communications and allowing them time, when possible, to attend face-to-face meetings and receive financial advice at work, companies can help employees achieve more successful outcomes and improve their long-term financial security.”