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, 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).¹ In 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."