Despite record inflation, economic unrest and a global conflict, defined contribution plan participants continued to save and invest in their retirement plans at work.
That’s according to the Investment Company Institute’s Defined Contribution Plan Participants’ Activities, First Quarter 2022 report, which tracks contributions, withdrawals and other activity based on DC plan recordkeeper data covering more than 35 million employer-based DC retirement plan participant accounts as of March 2022.
“Even as stock values declined at the start of 2022, DC plan participants generally stayed the course and refrained from changing asset allocations,” notes Sarah Holden, ICI Senior Director of Retirement and Investor Research. “Furthermore, the data suggest that through the first quarter of 2022, retirement savers continued contributing to DC plans.”
In fact, estimates by ICI indicate that only 0.9% of DC plan participants stopped contributing during the first quarter of 2022, compared with 0.8% in the first quarter of 2021, 1.4% in the first quarter of 2020, and 2.7% in the first quarter of 2009.
What’s more, DC plan withdrawal activity in the first quarter of 2022 remained low and was slightly lower than the activity observed in the first quarter of 2021. Here, the ICI found that only 1.8% of DC plan participants took withdrawals in the first quarter, compared with 2.2% in the first quarter of 2021, 1.8% in the first quarter of 2020 (as the COVID-19 pandemic hit the U.S.), 1.4% in the first quarter of 2019, and 2.7% in the first quarter of 2009, which the ICI notes was another time of financial market stress.
Levels of hardship withdrawal activity also remained low. Only 0.9% of DC plan participants took hardship withdrawals in the first quarter of 2022, compared with 0.6% in the first quarter of 2021, 0.8% in the first quarter of 2020, 0.5% in the first quarter of 2019, and 1.2% in the first quarter of 2009.
While withdrawal activity likely reflects the impact of ongoing financial stresses relating to the pandemic, the penalty relief and increased flexibility in plan withdrawals under the CARES Act, enacted in March 2020, were available only during 2020, the ICI observes.
Most DC plan participants also stayed the course with their asset allocations, even as stock values generally declined during the first three months of the year. Only 4.7% of DC plan participants changed the asset allocation of their account balances in the first quarter, slightly lower than the 5.5% who did so in the first quarter of 2021, 6.2% in the first quarter of 2020 and 5.5% in the first quarter of 2009.
Moreover, only 3% of participants changed the asset allocation of their contributions, slightly lower than the 3.9% who did so in the first quarter of 2021, 4.1% in the first quarter of 2020 and significantly lower than the 7.3% who did so in the first quarter of 2009.
Loan Activity
Other findings show that DC plan participants’ loan activity remained about the same in the first quarter of 2022. At the end of March 2022, 12.5% of DC plan participants had loans outstanding, compared with 12.5% at year-end 2021 and 14.8% at year-end 2020.
The ICI observes that it is possible that the availability of CRDs in 2020 has resulted in reduced loan activity. Additionally, a DC plan participant is no longer required by law to first take a plan loan (in plans with a loan option) prior to taking a hardship withdrawal, though some plans may retain this requirement.
- Log in to post comments