More than 1.5 million participants contributed to 401(k) accounts last year, an increase of 18% over the contributions by participants in 2013, said a report by Bank of America Merrill Lynch based on its record-keeping data.
“We’re clearly getting a bounce in the numbers from more young people” contributing to 401(k) plans, said Stephen Ulian, managing director for institutional retirement and benefit services, in an interview.
Because young adults are feeling more comfortable about their current finances, they are more willing to plan for the future, Mr. Ulian added. “Clearly, the economy has gotten better.”
Among the millennial generation — adults between 18 and 33 — Bank of America Merrill Lynch said 64% more of this group started contributing to a 401(k) plan in 2014 vs. 2013, according to proprietary data. The company didn’t provide additional details.
Bank of America Merrill Lynch also reported that the number of client plans offering automatic enrollment rose to 369 last year, up 8% from 2013.
DC sponsors are responding to a “competitive marketplace” by offering more plan design features, such as auto enrollment, to encourage greater participation by employees, Mr. Ulian said.
The increasing emphasis on financial wellness has prompted plans to offer more features to help employees improve their retirement savings, he added.
Plans declining to offer auto enrollment are most likely those with high employee turnover and those whose management is concerned about the extra administrative cost, Mr. Ulian said.
Bank of America Merrill Lynch also reported that 234 clients used both auto enrollment and auto escalation last year, up 25% from 2013.
The Bank of America Merrill Lynch report was based on records of some 2.5 million participants in 1,130 plans for which the company is the record keeper. These plans have aggregate assets of $128.9 billion.