New 401(k) loan transactions were down approximately 5% year-over-year, and total hardship and in-service withdrawals were down nearly 8%, according to Bank of America Merrill Lynch’s most recent 401(k) Wellness Scorecard, released Thursday.
“Loans and withdrawals dramatically spiked in 2009, 2010 and even in 2011 they somewhat moderated but were still up,” said Kevin Crain, head of institutional retirement and benefits services with Bank of America Merrill Lynch, during an interview at ASPPA’s 401(k) Summit this week. “We now see in 2012, on a year-over-year basis, for the first time in many years, the loans and withdrawals have decreased. Not dramatically, but enough to say ‘could that tide have turned?’”
Among employees who took an action in their 401(k) plan during the fourth quarter of 2012, 81% took a positive action, such as starting or increasing contributions, compared to 19% who took a negative action, such as stopping or decreasing contributions.
“The combination on the front end of people doing more positive things in the plan and on the back end of people not taking out as much as they have been is a good, positive sign,” said Crain.
Among the plans administered by Bank of America Merrill Lynch, 52% of plan sponsors who use automatic enrollment are now also using automatic increase. Overall, the firm saw a 17% year-over-year increase in plan sponsor use of auto-increase. Among plans using auto-enrollment, there was a 60% increase in the number of plans using default contribution rates of 6% or greater.
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