Dive Brief:
- The number of 401(k) participants taking hardship distributions increased 36% year over year, Bank of America said Aug. 8.
- Still, contributions remained steady and average balances are up, the bank said.
- The data tells two stories, Lorna Sabbia, the organization’s head of retirement and personal wealth solutions, said in a statement: “one of balance growth, optimism from younger employees and maintaining contributions, contrasted with a trend of increased plan withdrawals.” It shows the employees are understandably prioritizing short-term expenses over long-term saving at the moment, she said.
Dive Insight:
Bank of America’s report comes as plan sponsors weigh a new option to offer workers in-plan emergency savings accounts.
With the Secure 2.0 Act, Congress made non-highly compensated employees eligible for such benefits, in plan years beginning after Dec. 31, 2023, consulting firm Mercer explained in a report. Withdrawals from the accounts will have fewer restrictions than those from 401(k)s.
The shift comes after workers made it clear they want additional financial support from employers — support that goes beyond a raise.
Employees seem to be seeking a sense of financial security and stability, research shows. Many of those responding to a recent survey said they lack enough money for retirement. And in another survey, respondents said employers could offer financial wellness benefits and education to help mitigate that issue.
Earlier this year, HR pros said they’re doing just that. Nearly half of respondents to HR Dive’s annual survey said retirement benefits or contributions were part of their talent acquisition strategies. That offering saw the highest increase among a variety of total rewards package components; only 35% said retirement benefits or contributions were part of their recruiting strategy the previous year.
Employers will, of course, have to weigh costs. But one source previously told HR Dive that benefits that convey empathy, and that are truly meaningful, can help an employer differentiate itself in the job market.
