Participants in 401(k) plans administered by Bank of America Merrill Lynch had a banner 2016.

According to the firm’s quarterly Plan Wellness Scorecard, total plan assets increased 17 percent last year. All told, BofA Merrill manages $181 billion in total workplace retirement assets for 3.1 million plan participants.

Some of the increase in assets can be explained by the strong year in equity markets, which posted the highest returns since 2013.

But market returns tell only part of the story. The 17 percent increase in total assets was nearly twice the 9.5 percent total return posted by the S&P 500 in 2016.

According to Bank of America Merrill Lynch, double-digit growth across several areas of plan engagement accounted for much of the notable growth in assets. Total contributions increased 20 percent, and increases in automatic deferral rate changes were 18 percent.

The strength in engagement benchmarks is explained by employers’ increasing utilization of participant education programs through onsite meetings with Merrill reps, webcasts produced by the firm, and more one-to-one personal consultations, according to the Plan Scorecard.

Will fiduciary rule stifle engagement momentum?

The strong correlation between education initiatives and surging account balances raises the question as to whether or not the type of engagement-driven momentum seen in BofA Merrill plans will be deterred by the Labor Department’s fiduciary rule, which went into partial affect on June 9.

The defined contribution leadership at team at Bank of American Merrill Lynch—a firm that arguably has been most pronounced in backing the rule—doesn’t think the regulation will stifle progress seen in employee education and engagement initiatives.

“We do not anticipate any meaningful decline in plan engagement,” Sylvie Feist, director of financial guidance services at Bank of America Merrill Lynch Feist, told BenefitsPRO in an email.

“Our advisors and Financial Wellness Specialists will continue to be able to provide non-fiduciary services in the form of education and plan services. In fact, we may see plan engagement increase due to increased awareness of these non-fiduciary services among plan sponsors,” added Feist.

But some plan service providers and employer advocates are calling on the Labor Department to delay full implementation of the rule, slated for January 1, 2018, on the grounds that it will stifle the impact employee engagement programs have on increased savings rates.

“The fiduciary rule would unfortunately preclude service provider employees from encouraging employees to contribute more to the plan,” wrote Lynn Dudley, senior vice president for the American Benefits Council, in a recently submitted comment letter to Labor.

Under the rule, any advice to buy, sell, or hold a security in qualified retirement accounts is a fiduciary recommendation.

According to ABC’s interpretation of FAQs issued by the Labor Department, that threshold extends to service providers’ education on contribution rates. Employers can encourage participants to contribute more to plans without engaging in a fiduciary act, but not service provider employees, the ABC says.

“For employers that outsource plan functions – which is the overwhelming majority of employers – this prohibition would have the effect of reducing savings and would frustrate plan sponsors’ objective to help their employees,” wrote Dudley. “We know of no policy reason to prohibit service providers from encouraging employees to achieve a secure retirement by contributing to the plan.”

ABC is urging at least a one-year delay of the rule, and is calling on regulators to craft a new safe harbor specifically for call center employees that will allow advice on contribution levels without triggering fiduciary liability.

“It is critical that plan sponsors have a clear safe harbor from liability, without intense burdens to monitor their call centers on a constant basis,” added Dudley.

When the Department was first considering a delay of the rule last April, Empower Retirement, the country’s second largest recordkeeper to defined contribution plans, said attempts by regulators to clarify when education rises to the level of fiduciary advice have only created more uncertainty as to how service providers can engage employees.

That type of uncertainty “will result in either a scaling back of services that plan sponsors and participants receive today, or an increase in the cost of those services,” wrote Edmund Murphy, president of Empower, in a comment letter.

Millennial contribution increases offset retiring boomer outflows

The Labor Department is expected to weigh the rule’s impact on 401(k) participants’ access to education as it considers revisions to the rule.

A growing consensus in industry is to expect substantial changes to the rule and a delay in the January 1, 2018 full implementation date of at least one year.

The data from Bank of America Merrill Lynch’s Plan Scorecard is the latest in the collective body of industry research tying participant education and streamlined plan design to improved savings rates.

Contribution increases were seen across all demographics in the Plan Scorecard, with millennials leading the way. Among eligible participants, 82 percent of millennials contributed to plans last year, compared to 77 percent of GenXers and 75 percent of Baby Boomers.

Automatic enrollment is having a significant impact on the participation rates of millennials. For ages 28 to 34, 88 percent of eligible participants are contributing to plans. That is helping to offset the steady flow of assets from retiring baby boomers’ accounts, BofA’s Feist said.

“Simplified enrollment solutions combined with improvements in digital and mobile technology are also playing a major role in driving increased engagement among millennial populations,” said Feist.

Instant Insights /

Engagement driving growth in BofA Merrill 401(k) plans

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