Despite widespread anxiety in the first few months of the COVID-19 pandemic, most 401(k) plan sponsors and participants are staying the course, according to new data.
In relation to the CARES Act provisions, data from Principal shows that as of Aug. 31, only 3.2% of participants with a coronavirus-related distribution (CRD) available have taken one for the period March–August 2020. The average amount taken for a coronavirus withdrawal is $16,500.
The data is based on active participants only with service by Principal and does not include Well Fargo Institutional Retirement & Trust.
The firm notes that loan requests are down 23% overall from this time in 2019, but the average amount requested is up 20%. In addition, the typical CRD profile is male, average 35-54 years old, and works in mining, manufacturing, accommodation/food service or transportation industries.
As a reminder, the last day to take the expanded CARES Act loan provision if the plan allows it was Sept. 22, while the last day to take a CRD is Dec. 30. Of course, these dates could change if Congress and the Trump administration reach an agreement on an additional stimulus package, which likely won’t be until after the election, if at all.
On a positive note, nearly all (99%) plan participants stayed the course in maintaining their retirement savings contribution rate. The report notes that this level has remained steady for the period for August 2019 to August 2020.
Of those who made a change, Principal notes that decreases in contributions slowed, but participants remain hesitant to increase them:
- less than 0.1% started deferring;
- nearly 0.2% increased deferrals;
- less than 0.1% decreased deferrals; and
- less than 0.1% stopped deferring.
Transaction activity remained low, with approximately 0.5% of participants initiating a transfer in August, which was comparable to August 2019, according to the data. Transfer activity continues to favor more stable/conservative investments, while the top asset classes gaining net assets in August were bond, large cap and stable value funds.
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Among plan sponsors, Principal notes that approximately 55% of plan sponsors have responded to the CARES Act communication, with the vast majority (93%) of those plan sponsors adopting the three CARES provisions—adding the special Coronavirus-related distributions (CRDs), RMD waivers for 2020 and increasing loan limits.
August plan amendments have slowed to nearly 70% less than those submitted in July 2020. In addition, approximately 1.1% have plan amendments to change the employer match since March 11, 2020, with 90% of those respondents stopping their employer match, while 6% reported that they added a match.
As for web and mobile activity, Principal’s data shows that average daily visits were consistent with July for web and mobile visitors combined, but 10% lower than June 2020. Mobile activity accounted for 35% of visitors in June, up steadily from 28% in January.
In addition, participant call volume is up 17% from the period August 2019 to August 2020, while call duration remains up nearly 20%, with the main topics including distributions, loans and withdrawals.
