It’s not surprising given recent favorable press and political coverage, but employees are increasingly adopting tax-advantaged health savings accounts (HSA) to manage rising healthcare costs, both today and in the future.
A new Bank of America Merrill Lynch report finds that last year the number of employees contributing to an HSA increased 21 percent with HSA balances increased 36 percent.
It adds that 70 percent of contributions are used during the year while 30 percent remain in the account for future health expenses.
The report itself covers a range of topics relevant to 401k advisors, including double-digit growth in employee engagement with 401ks.
Last year saw a 17 percent increase in plan assets, 20 percent increase in contributions and an 18 percent increase in deferral rate changes.
Millennials were most engaged, with 82 percent of those with access to a 401k plan contributing, compared to 77 percent of Gen X and 75 percent of Baby Boomers.
Employers are significantly embracing simplified plan features like auto-enrollment and auto-increase to help increase employee saving rates, with a whopping 153 percent in 2016.
Among employers using auto-enrollment, 87 percent combine this plan feature with auto-increase. During the last year alone, the use of auto-increase among employees has risen 24 percent.
Compared with five years ago, we’ve seen a 172 percent increase approximately 115,000 employees in 2012 compared to nearly 315,000 today).
The report also notes Roth 401ks on the rise—especially for younger employees.
Among the 57 percent of plans that offer a Roth 401k option, the number of employees contributing to Roth 401k accounts increased by 31 percent. Fully 56.5 percent of Roth 401k contributions come from employees 40 or younger.