Uncertainty over the outcome of November’s presidential election and last month’s congressional fiscal cliff negotiations may have spurred employees to more aggressively save in their 401(k)s, according to Bank of America Merrill Lynch’s latest quarterly numbers for its retirement and benefit plan services business.
For the quarter ending Sept. 30, more than 141,000 employees started or increased their participation in the retirement plans provided through plan sponsors. Those results for the third quarter nearly matched the firm’s second quarter results that saw more than 142,000 who started or increased contributions to their retirement plans.
The latest numbers mean that almost 490,000 employees have started or increased their retirement savings in Bank of America Merrill Lynch’s plans in the past year. The firm currently serves 2.5 million plan participants who carry balances in their retirement accounts. The total assets in those client plans are $98.2 billion.
The consistency of the contributions this quarter — even as economic concerns mounted with presidential election and fiscal cliff — points to an a long-term positive behavioral trend in place since 2009. That trend comes as plan sponsors are working with Bank of America Merrill Lynch to keep their employees actively engaged through automatic enrollment, automatic increase and advice features in their plans, says Kevin Crain, head of Institutional Retirement & Benefit Services at Bank of America Merrill Lynch.
Since 2009, the plans have seen a 42% uptick in the use of the auto-increase feature. The firm also has seen a 43% increase in the number of participants defaulting or auto-enrolling in its Advice Access program, a tool that provides personalized savings and investment advice.
“The plan sponsors are doing their job about getting these plans set up structurally, so employees can easily engage initially, stay engaged ongoing and even increase engagement in terms of savings behaviors,” Crain says.
The plan sponsors have also increased their engagement in the plans since 2009, according to Crain, with plan sponsors having increased the use of the automatic increase over the automatic enrollment feature. At the same time, Crain says, more have worked to boost their initial default savings rates from 3% to as much as 6% to start.
Those actions by plan sponsors have led to more positive behaviors from employees when it comes to retirement savings, says Michael Liersch, director of behavioral finance at the firm.
“It really appears that they’re thinking of this in terms of their long-term retirement goals and futures and contextualizing the decisions they’re making around participation deferral rates, this notion that my time horizon is long,” Liersch says. “It is not based on one particular election, and I think that is encouraging.”
Lorie Konish is managing editor of On Wall Street, a SourceMedia publication.
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