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Our proprietary data reveals how individuals in the U.S. have changed their savings behaviors over the course of the COVID-19 pandemic as business and travel restrictions disrupted our economy. Throughout the summer months, we've started to see some very early signs of recovery.

Our proprietary data reveals how individuals in the U.S. have changed their savings behaviors over the course of the COVID-19 pandemic as business and travel restrictions disrupted our economy. Not surprisingly, we saw notable shifts in savings plan contributions and withdrawals in the first few months of the outbreak, as individuals experienced changes in employment and braced for the potential financial fallout. States across our nation have since begun phased reopenings of businesses, and our data already suggests positive signs of savings recovery.

Retirement

• The industries that we reported as having the most significant drop-off in retirement plan contribution activity as of the end of May have seen striking improvements in these contribution deficits:
  • Accommodation & Food Services: 5.4% more plans contributed in June, a 96% deficit reduction from May
  • Health Care & Social Assistance: 3.8% more plans contributed in June, a 75% deficit reduction from May
  • Retail Trade: 2.4% more plans contributed in June, a 95% deficit reduction from May
• 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.
• Positively, 9.0% of employers that decreased their retirement plan match in or after March have since increased their match or returned to pre-March levels.
• In 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.
• 13.7% of employers have adopted coronavirus-related distributions (CRDs), with only 1.6% of all eligible savers actually taking a CRD as of the end of June. The monthly CRD utilization rate of CRDs by savers is quite slow but steady.

Education Savings

• In June, there was 16.5% decrease in the total amount of one-time 529 account contributions based on projections, representing a 4 percentage point improvement over May. This improvement was primarily driven by higher average amounts per one-time contributions made in June. While there may be fewer savers actively making one-time 529 contributions (9.5% less than projections), those who continue to invest in their 529 via one-time contributions are saving at pre-COVID levels.
• 529 withdrawal activity remains low, with a 29.6% decrease in the number of withdrawals, as schools and students continue to evaluate how their learning environment and expenses might shift in light of the pandemic.

Health and Benefits

• According to data from Chard Snyder, an Ascensus company, there was a 10.1% increase in the number of COBRA qualifying events March through May. In June, qualifying events returned to 2019 levels.
• Chard Snyder also reports a 21.1% decrease in debit card transactions from consumer-directed healthcare accounts in March through May. In June, the number of these transactions returned to pre-COVID projections and the average amount per transaction increased over 2019 levels. This trend highlights the pent-up demand by consumers to access healthcare services and leverage these savings.

View and download the complete State of Savings report here.

Rep. Sean Maloney (D-NY) has introduced H.R. 7645, legislation that would extend the time period for taxpayers to withdraw coronavirus-related distributions (CRDs) from retirement savings arrangements and receive the special tax benefits that CRDs provide. Certain withdrawals could be tax-free under the legislation.

Understanding the CARES Act: Expanded Health and Dependent Care Options

Few aspects of retirement plan governance have been as controversial as regulating investment advice. Exactly what obligation—if any—does an investment professional have to provide impartial, conflict-free advice to savers and retirees?  When do financial professionals step over the boundary that can make them a fiduciary, with the ethical and legal obligations that come with this duty?

Our proprietary data reveals how Americans changed their savings behaviors over the course of the COVID-19 outbreak as business and travel restrictions disrupted the U.S. economy. These insights serve as an early baseline for the evolution of savings plan contribution and withdrawal behaviors in response to the pandemic and subsequent passage of the CARES Act. We expect to see new trends emerge as financial markets continue to rebound and stabilize and as states across the nation gradually reopen their economies.

The retirement industry eagerly received the IRS guidance on applying provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act with the issuance of Notice 2020-50 on June 19. It has provided important details on compliance with this legislation—which offers financial and tax relief to millions of Americans affected by the coronavirus (COVID-19) pandemic.

The Department of Labor’s Employee Benefits Security Administration (EBSA) has released a pre-publication version of a request-for-information (RFI) seeking public comments on issues pertinent to pooled employer plans (PEPs) and multiple employer plan (MEPs).

Scheduled for publication in next Tuesday’s Federal Register is a Small Business Administration (SBA) interim final rule on the agency’s Paycheck Protection Program (PPP). This guidance is being issued in response to enactment on June 5 of the Paycheck Protection Program Flexibility Act of 2020, legislation that made enhancements to this SBA loan program intended to help small employers meet payroll and other expenses as they deal with the economic effects of the novel coronavirus (COVID-19) pandemic.

Understanding the CARES Act: Contribution Deadline and Defined Benefit Funding Relief