401(k) plan participants continue to save during pandemic

Recent reports suggest that despite market volatility, plan participants’ contribution and withdrawal levels remain generally unchanged

Despite uncertain market conditions during the COVID-19 pandemic, Americans continued to save for retirement through defined contribution (DC) plans in the first quarter of 2020, according to an Investment Company Institute (ICI) study.

Preliminary estimates in the ICI’s “Defined Contribution Plan Participants’ Activities, First Quarter 2020” report show that only 1.4% of DC plan participants stopped contributing to their plans in that time period, compared with 0.9% in the first quarter of 2019 and 2.7% in the first quarter of 2009 (another time of financial market stress).

The study tracks contributions, withdrawals, and other activity, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans.

Other findings of the study include:

  • Asset allocation. Most DC plan participants stayed the course in their asset allocations. Though stock values fell during the first three months of the year (about 20%), only 6.2% of DC plan participants changed the asset allocation of their account balance in the first quarter of 2020 — slightly higher than the activity seen in the first quarter of 2019 (4.2%), as well as during the first quarter of 2009 (5.5%).
  • Withdrawals. Withdrawal activity for DC plans remained low in the first quarter of 2020, although it was slightly higher than the activity observed in the first quarter of 2019. According to the data, only 1.8% of DC plan participants took withdrawals in the first quarter of 2020, compared with 1.4% in the first quarter of 2019 and 2.7% during the same period in 2009.
  • Loan activity. DC plan participants’ loan activity edged up in the first quarter of 2020, but only slightly. At the end of March 2020, ICI found that 16.3% of plan participants had loans outstanding, compared with 16.1% at year-end 2019 and 15.9% at the end of March 2019.
  • Coronavirus Aid, Relief, and Economic Security (CARES) Act implications. It is unlikely that the CARES Act, enacted on March 27, 2020, had time to have a significant impact on DC plan participants’ activities in the first quarter of 2020. The study posits that some individuals may have taken hardship withdrawals in anticipation of the expected suspension of the 10% penalty on early distributions related to the COVID-19 pandemic. (The CARES Act also contained optional provisions that expanded the amounts available for loans for those affected by COVID-19.) Plan sponsors had a limited time frame to implement the new optional provisions before the end of the first quarter.

Later studies show comparable savings and withdrawal activity

In its “State of Savings: June 2020” study based on traditional retirement plans on the firm’s platform, Ascensus found that more than 93% of retirement savers made no changes to their savings rates, illustrating the positive value of automatic payroll deduction. Additionally, most retirement savers haven’t been tapping into existing savings.

In fact, from January through May 2020, the study noted that only 5.3% of savers stopped contributing, including 1.3% who discontinued their contributions and those who were furloughed or terminated. In addition, only 1.8% reduced their savings rate, while 3.8% increased their savings rate.

A separate “snapshot” survey conducted by the Plan Sponsor Council of America (PSCA) in early June disclosed that for plans that allow “coronavirus-related distributions” under the CARES Act, nearly 40% of responding plans said that anywhere from 1% to 5% of their participants have taken them. The rest of the plan sponsors that PSCA surveyed said that fewer than 1% had taken distributions.

What to make of these recent reports

Based on these reports, it would appear that the majority of plan participants to date are trying to “stay the course” with respect to savings rates and withdrawal activity in their retirement plan accounts despite the economic uncertainty during the pandemic.  As a practical matter, participants with lower household income and fewer resources outside of their retirement accounts may be more likely to consider plan distributions and loans due to this period of financial stress.

We’ll keep you posted on further related developments.


Investment Company Institute (ICI), “ICI defined contribution plan recordkeeper data show ongoing commitment to retirement saving during COVID-19 pandemic,” May 14, 2020

NAPA Net, “401(k) investors show ongoing commitment to saving during pandemic,” Ted Godbout, May 15, 2020

Investment News, “401(k)s add COVID-19 cash outs, few workers take them,” Emile Hallez, June 26, 2020

NAPA Net, “Here’s how plan sponsors and participants have reacted to COVID-19,” Ted Godbout, July 1, 2020

Important information

Blog header image: Rob + Julia Campbell / Stocksy

Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Jon spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Jon earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He has a B.A. in History from Rutgers, The State University of New Jersey.

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