Bank of America's third-quarter data shows balances up 9.8 percent since year-end, with more participants taking hardship distributions
Average 401(k) balances at Bank of America-administered plans rose 9.8 percent from year-end 2025 to $122,560 by September, yet hardship distributions increased on every measure tracked over the same period, according to Bank of America's Q3 2026 Participant Pulse report on 401(k) and HSA behavior. The quarterly report covers more than four million participants in 401(k) and health savings account (HSA) programs. The bank is a retirement plan recordkeeper with a commercial interest in participation.
Hardship signals
The share of participants taking a hardship distribution rose to 1 percent in the third quarter, up from 0.88 percent in the second quarter and 0.79 percent in the third quarter of 2025. The average hardship amount increased to $5,220 from $4,990 in the prior quarter. The average contribution rate held at 7.3 percent, consistent with the prior quarter.
Other data points in the same direction. Vanguard found that 6 percent of participants in the plans it administers took a hardship withdrawal in 2025, up from 4.8 percent in 2024, according to Employee Benefit News. The two data sets cover different populations, but both show hardship withdrawals rising.
Pressure on household budgets is visible elsewhere with reports that employee affordability concerns are adding to employers' benefits dilemma. Marsh projects employer health costs will rise 8.2 percent per employee in 2027, with employer health costs rising 8.2 percent in 2027.
Plan design and balances
The report also shows a gap tied to plan features. Participants in plans with automatic enrollment and automatic contribution increases held average balances above $190,000 in September, more than $67,000 above the overall average. The pattern is not new. In its second-quarter 2025 report, Bank of America found plans with those features averaged $158,000, against $107,430 overall, according to the Plan Sponsor Council of America.
Bank of America says plan design can affect account balances. The comparison is between plans, not between identical workers, so it points to an association rather than a measured effect of auto features alone. Federal law now requires most new 401(k) plans to include an automatic escalation option, according to BambooHR, and plans that predate the requirement can adopt the features voluntarily.
HSA behavior
The health savings account data runs the other way. The share of contributions saved rather than spent on current healthcare expenses rose to 28 percent in the third quarter, from 19 percent in the second quarter and 27 percent in the third quarter of 2025. Average HSA balances reached $6,090, up nearly 9 percent since year-end 2025.
Bank of America said younger employees are increasingly treating HSAs as long-term savings vehicles and not as spending accounts. That suggests two audiences with different needs: participants drawing on retirement savings to cover current costs, and participants building a second savings account.
Employers weighing spending against governance may find the report useful. A 2026 benchmarking report found employers prioritizing governance and precision over new benefits programs.
