More and more, employees are looking for financial help at the workplace spurred by the growth of defined contribution (DC) plans like 401(k)s and 403(b)s which has 80 million participants and are replacing defined benefit (DB) plans. In turn, employers sponsoring a DC plan are looking for help from their record keeper and advisor to improve financial wellness. According to an analysis by Bank of America of the 2.6 million participants in the plans they manage which includes $136.3 billion in assets, the news is good and getting better.
Highlights of the analysis from the 1st six months of 2015 include:
- New enrollment is up 44%
- Use of a personalized advice tool is up 7% utilized by 57% of existing plans and 87% of new plans
- HSA enrollment is up 42% led by Baby Boomers who have the highest account balances – Millennials are increasingly adopting HSAs accounting for 33% of participants up from just 9% in 2010
- Simplified processes yields 77% enrollment compared to just 58% for traditional methods
- 5% of plans use auto-enrollment and, of those, 78% use auto-escalation
- Mobile usage is up from 11.9% last year to 18.5% of transactions
- Attendance at one on one meetings has increased 192%
- Roth 401(k) usage and contributions increased 20%
Employers struggle at times with their DC plans as it is not an area of expertise and can be fraught with liability and complicated rules. These plans might not get proper attention because the company does not have to write a big check like with healthcare. But financial wellness is becoming an important recruiting and retention tool as workplace automated savings has proven to be so effective.
Plan sponsor have the opportunity to help their workers without increasing costs, liability and work by working with providers that have the right technology and procedures as well as plan advisors that can leverage those tools to meet the unique needs of the companies and their employees. The industry is moving in the right direction – employers just need to know which providers and advisors to leverage. It’s all starts with hiring the right advisor. (For a directory of advisors certified by TRAU (The Retirement Advisor University), go here; for help selecting an advisor go here.)
