Aon Hewitt Analysis Finds More Employers Adding Roth Features to Expand Savings Options

Employees Using Roth Features Save More for Retirement than Non-Roth Users

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Apr 28, 2014, 09:15 ET

LINCOLNSHIRE, Ill., April 28, 2014 /PRNewswire/ -- As lawmakers debate legislative proposals that would expand the use of Roth features in 401(k) and other savings plans, an analysis from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), shows companies and workers are increasingly receptive to these features as a retirement savings vehicle. The analysis reveals more U.S. employers are adding Roth 401(k) features than ever before and participation is also on the rise.

Aon Hewitt's research finds that half of all companies now offer a Roth account, nearly five times the percentage that did so in 2007 (11 percent).¹In a separate report, Aon Hewitt analyzed more than 3.5 million eligible participants in over 125 defined contribution plans and found that employee participation in these Roth accounts is also steadily increasing. In 2013, 11 percent of workers saved to a Roth account when it was available in the plan, up from 8 percent in 2011.

"Continued changes to legislation around Roth, coupled with increased awareness and understanding of these plan features, are driving more employers to add Roth savings feature to their plan," said Rob Austin, director of Retirement Research at Aon Hewitt. "Because of the potential tax benefits, employees increasingly see Roth accounts as attractive savings options and we anticipate that the use of Roth will continue to rise."

Roth 401(k) plan features can also improve retirement readiness. Aon Hewitt's analysis shows that while the average pay of Roth users was slightly higher than for non-Roth users (6 percent higher), Roth users contributed significantly more to their plan than non-users. In 2013, workers saving to a Roth account contributed an average of 10.2 percent, compared to just 7.7 percent for non-Roth savers (32 percent higher).

Roth Use by Age and Salary
Roth 401(k) plans tend to be an attractive savings vehicle for a subset of workers. Where Roth 401(k) accounts are available, 15 percent of workers in their 20s contributed to a Roth, compared to fewer than 8 percent of workers in their 50s.

In addition, workers earning between $60,000 and $79,000 were most likely to use Roth 401(k) accounts (12 percent), compared with just 6.3 percent of workers earning $20,000 and $39,000 and 10 percent of workers earning more than $100,000 annually.

"Young workers and mid-level earners are most likely to benefit from investing based on today's tax rate," emphasized Austin. "These workers are more likely to anticipate future tax bracket increases, so they are taking actions now that are likely to benefit them down the line."

Visit www.aonhewitt.com to read Aon Hewitt's paper, Roth Usage in Defined Contribution Plans.

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About Aon Hewitt
Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.

¹ Aon Hewitt, 2013 Trends & Experience in Defined Contribution Plans (Lincolnshire, IL: Aon Hewitt, 2013), 14.

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