Employer Matches Show Signs of Recovering

Since the start of the pandemic in March, retirement plan contribution activity has been volatile, but there are some encouraging signs from both employers and employees, according to new data from Ascensus.  

The firm notes in its October 2020 State of Savings report that over the course of the summer and early fall months the firm continued to see volatility in employer contributions to retirement plans and in COBRA qualifying events, which can signal employment status changes. 

Overall, employer contribution amounts have remained steadily below projections, with the most dramatic drops in March and April and an uptick in May through July. As of the end of September, employer contributions appeared to have settled at a more consistent monthly amount, yet they remain 6.4% lower than projected, the firm notes. 

According to the firm’s data, 6.6% of employers didn’t contribute a match in September, either choosing to stop their match (2.9%) or having no match obligation (3.7%) due to payroll interruption.

On a positive note, 14.1% of employers have restarted their plan matching contributions after some match interruption during March through August.

Plan match changes from March through September include: 

• No change: 76.8%
• Restarted match: 4.9%
• Restarted payroll and also match: 9.2%
• Stopped: 2.9%
• Unknown, due to payroll interruption: 3.7%
• Decreased: 1.6%
• Increased: 0.9%

Meanwhile, the vast majority of savers made no change to their savings rate. In January through September, only 1.4% of savers stopped their deferrals entirely and another 1.7% of savers are no longer receiving contributions to their retirement account—most likely due to furlough or termination. The small population of savers that is no longer receiving contributions is concentrated in the smallest retirement plans, the firm notes. 

CRDs, CARES Act Loans

Ascensus also reports that it continues to see moderate to low employer adoption of CARES Act distribution and loan options relative to early industry projections. However, larger plans (100+ savers) are adopting at more than four times the rate of the smallest plans (25 or fewer savers).

The data below includes Coronavirus-related distribution (CRD) adoption by plan size, based on number of employees:

• 25 or less (9.4%)
• 26–50 (16.8%)
• 51–75 (23.9%)
• 76–100 (26.7%)
• 101+ (43%)

Overall, 15.3% of employers have adopted CRDs and 9.9% have adopted CARES Act loan provisions through September.  
Eligible savers continued to take CRDs and CARES loans at a consistently low rate through August, with even lower utilization in September. Overall, only 2.9% of eligible savers took a CRD from April through September, with only 0.3% taking a CRD in September. For loans, the data shows that only 1.4% of eligible savers initiated a loan from April through September, with only 0.2% taking a loan in September. 

Additional findings show that 5.2% of savers who took a CRD withdrew the maximum allowable amount of $100,000, but most CRDs were below this maximum with an average of $15,700. Those savers taking CRDs share some characteristics: 42.5% were between the ages of 45 and 54 and 62.3% had annual salaries between $30,000 and $50,000.

The firm’s analysis is based on traditional retirement plans on the Ascensus platform with 500 employees or less.