Employer matching contributions to retirement plans decreased 5.5% from March through July (based on projections), a 2 percentage point improvement over June, according to the latest State of Savings Report from recordkeeper Ascensus.
Throughout the summer months, Ascensus reports starting to see some very early signs of recovery. Employers that dialed back matching or discretionary contributions to their retirement plan are reconsidering this decision. Improvements in total employer contributions were driven by employers reinstating matching contributions that they had previously stopped or decreased and other discretionary contributions.
The report found 7.8% of employers did not contribute a match in July, either choosing to stop matching contributions (4.3%) or having no match obligation (3.5%) due to payroll interruption. Positively, 7.0% of employers have returned matching to pre-COVID levels.
Plan Match Changes March-July 2020
- 82.8%: No change
- 7.0%: Restarted match
- 4.3% Stopped match
- 3.5%: Unknown due to payroll interruption
- 2.1%: Decreased match
- 0.3%: Increased match
The Ascensus analysis is based on plans with 500 employees or less, exploring how temporary business closures and subsequent reopenings have impacted these employers and employees. The Ascensus platform represents more than 116,500 retirement plans covering more than 11 million Americans.
Participants staying the course
The vast majority of savers made no change to their savings rates, illustrating the positive value of automatic payroll deduction, the report says.
Though many are “staying the course,” 1.4% have stopped deferring and another 1.4% of savers are no longer receiving contributions to their retirement account, most likely due to furlough or termination. This small population of savers that is no longer receiving contributions is concentrated in the smallest retirement plans.
The report found 2.1% of plan participants reduced their savings rate while 4.5% increased their savings rate.
From March-July, the report says there has been a 22.7% decrease in the number of standard retirement account withdrawals based on projections. “In addition to this decrease in standard withdrawals, we’ve also seen lower-than-projected loan activity, low utilization of CRDs and CARES loans, and very few savings rate changes on our retirement platform,” the report says. “Together, these factors suggest that savers could be using other means to manage financial needs through this period or that they’re delaying otherwise planned retirement or job changes.”
529 Plans
When it comes to saving for college, the Ascensus report found individuals continue to make relatively lower one-time 529 account contributions compared to last year, but they’re also refraining from withdrawing existing savings as they determine what the outlook will be for their beneficiaries’ education plans. From the last week of March through July, Ascensus found a 26.5% decrease in the number of qualified 529 withdrawals.
HSAs
The number of debit card transactions from consumer-directed healthcare accounts spiked above projections for the month of July, as individuals tapped into their health savings accounts to access services from their healthcare providers who might have previously experienced business closures or delays in service.
Ascensus saw a 9.4% decrease in debit card transactions from consumer-directed healthcare accounts in March through July, in spite of increasing activity in June and July.
To view the full State of Savings report, click here.
SEE ALSO:
- New Savings Data Suggests ‘Positive Signs’ of Recovery
- COVID-19 Having Bigger Impact on Smaller 401ks
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.