Proprietary data from Ascensus reveals how U.S. employees shifted their savings behaviors last month, as the COVID-19 pandemic disrupted the U.S. economy and financial markets.
The firm notes in “How Saver and Employer Behaviors Are Evolving in Response to COVID-19” 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.
The firm also observes that drop in dollar contributions is partially a result of a 5% reduction in plans that contributed in March.
One positive finding is that 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.
Ascensus emphasizes that these insights serve as an “early baseline” of how contribution and withdrawal behaviors have evolved in response to the pandemic. To that end, the firm cautions that it expects continued shifts and new trends to emerge as the full impact of the CARES Act, which was signed into law on March 27, takes hold and begins to “flow through the economy and Ascensus’ savings plans.”
By comparison, findings from Fidelity 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.
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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.
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, the firm notes.
As for education savings, the firm also reports that in the last two weeks of March, the average amount per qualified Section 529 withdrawal was 15% lower compared to the same period in 2019. Ascensus notes that this may be attributable to the pandemic’s impact on higher education, as some colleges and universities reduced fees when they transitioned to remote learning. Additionally, the average one-time contribution to a 529 account in the last two weeks of March was 20% lower than during the same period in 2019.
