Here’s the Latest on Participant Behavior During the Pandemic

While various shifts were seen in savings plan contributions and withdrawals in the first few months of the outbreak, there have been some improvements as of late, according to data from Ascensus. 

 

In the first few months of the COVID outbreak, the firm reported on a relatively small percentage of retirement plans that had stopped making contributions altogether due to business interruptions. But on a more positive note, as of the end of June, most of these plans have shown encouraging signs of recovery and are taking steps to return to pre-pandemic levels of savings plan contributions, Ascensus reports in its “State of Savings: July 2020” report.

The firm’s analysis is based on plans with 500 employees or less.

 

The most striking month-over-month improvements were seen among the smallest businesses and within industries that Ascensus previously reported as having the most significant drop-off in retirement plan contribution activity. The industries reported as having the most significant drop-off as of the end of May that have seen improvements in these contribution deficits include: 

 

“These plans do continue to see reduced amounts of employer contributions and/or less savers making contributions, but the fact that they are once again actively contributing represents a step in the right direction,” Ascensus notes.

 

Overall, Ascensus reports, 80.6% of plans made no matching changes through June, while 10.4% of employers have stopped or decreased their match as of the end of June.

 

Positively, 9.0% of employers that decreased their match in or after March have since increased their match or returned to pre-March levels. 

 

Though there was a 7.4% decrease in the total amount of employer contributions through June based on projections, this represents a 4-percentage point improvement over May, the report observes.  

 

Moreover, as furloughed employees began to return to work, Ascensus saw a 37.7% improvement over May in number of savers who stopped contributing to retirement accounts.

 

 

Employer adoption of coronavirus-related distributions (CRDs) and expanded loan options offered through the CARES Act slowed throughout the month of June, with adoption of loans lower than that of CRDs.

 

In both cases, according to the report, larger plans are adopting at a significantly higher rate than the smallest plans (25 or fewer savers). The data below includes CRD adoption by plan size, based on number of employees:

 

Overall, 13.7% of employers have adopted CRDs, with only 1.6% of all eligible savers actually taking a CRD as of the end of June. Ascensus observes that the monthly utilization rate of CRDs by savers is “quite slow but steady.” The firm also reports that:

 

Additional findings show that from January through June, 93.1% of savers made no change to their savings rates—only 1.3% of savers stopped their deferrals entirely and only 1.9% reduced their savings rate. “Overwhelmingly, 93.1% savers made no change to their savings rates, illustrating the positive value of automatic payroll deduction and suggesting that savers could be using other means to manage financial needs through this period,” the report observes.