Among the things that have changed during and because of the pandemic is how employers and retirement plan participants are behaving, a recent report indicates.
In “How Saver and Employer Behaviors Are Evolving in Response to COVID-19,” Ascensus provides an analysis of how employers and employees changed their behavior in March 2020.
Contributions
The firm notes that contributions to retirement plans by employers and employees in March were 26% lower and 19% lower than projected, respectively. This finding is based on plan data history from the Ascensus platform from Jan. 1, 2019, through March 31, 2020. It also observes that drop in dollar contributions is partially a result of a 5% reduction in plans that contributed in March.
These results stand in contrast to those reported by Fidelity, which show that contribution rates remained steady, while loan and withdrawal activity also remained low. The firm’s findings, however, were also prior to the enactment of the CARES Act.
The Good News
The Ascensus report also has good news: the number of employee distributions and new loans taken from retirement plans fell below monthly projections. In addition, the amount requested per distribution and the number of hardship withdrawals aligned with monthly projections.
Notably, Ascensus also found that there was no significant change in nonqualified withdrawal activity as of the end of March. “In the face of COVID-19 and its related challenges, many Americans understandably adjusted their contributions to savings plans. However, savers haven’t yet tapped into existing savings and are making efforts to ‘stay the course’ to help ensure financial security,” Ascensus observes.
And, Ascensus adds, the passage of legislation adding another $320 billion for the Paycheck Protection Program may also help small business owners and savings plan sponsors continue to support their employees.
A Caveat
Ascensus writes that in its report it seeks to provide an “early baseline” of how contribution and withdrawal behaviors have evolved in response to the pandemic. It adds that it expects that there will be continued shifts and new trends as the CARES Act continues to be implemented and affect the economy and plans.
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