2012 a Model Year for 401(k) Savings: BofA Merrill

Merrill has increased its training of its top plan advisors, currently numbering 150, but with plans to expand the group who receive this high-level training, to convince plan participants of the merits of not just selecting a high initial deferral rate, but opting for an automatic annual deferral rate increase.

Crain describes plan participants as a generally passive lot. Once in a program, they tend not to take any actions, for better or worse. So, even if they’re deferring at a decent rate, they tend not to increase later contributions.

But, if they initially sign up for an auto-increase of their salary deferral, they tend to leave that in place, too. “They keep getting bumped up; eventually we get them from 5% to 10%. With a company match, that’s a pretty good annual contribution,” he says.

The Bank of America Merrill Lynch study also described the integration of employee health care and 401(k) plan enrollment as another key plan design innovation that made it more likely employees would take advantage of their employer’s plan.

“When plan sponsors present employees with an easy ‘one-click’ option to enroll in or make a contribution change to their 401(k) plans during the annual health benefit process, we have seen significant increases in plan participation among new employees and in plan contributions among existing participants,” the report states.

The second key reason, aside from plan design improvements, leading to 2012’s exemplary results was promoting more face time with financial advisors. Specifically, employers offered in-person meetings were 67% more likely to increase enrollment or contributions in a company plan.

“There was a 30% increase in plan sponsors using face-to-face meetings,” Crain says. “They say, “Hey, this is great. I can tell our employees that another benefit I’m bringing them is financial education.’ In the old days, it was all about enrolling but now it’s much broader.”

Today, the firm encourages its plan advisors to promote general financial education as a benefit to the plan sponsor and participant alike. Rather than just signing people up, these education sessions are “about how to save in general and ways to save; how to budget in general and ways to budget; how to manage expenses in general and ways to do it,” Crain says.

The firm reports that tens of thousands of employees attended seminars or face-to-face meetings with a Bank of America Merrill Lynch financial professional last year at their place of work, a trend it hopes to encourage in future years based on the results of its 2012 model.