Did Many Employees Take 401k Distributions During Coronavirus

Q: Early in the pandemic, we were very concerned that employees would take as much money as they could out of our 401(k) plan. That didn’t happen. How have other companies (and their plans) fared with 401k distributions? 

 A: Your experience seems similar to what others have experienced. A survey conducted jointly by Commonwealth and the Defined Contribution Institutional Investment Association’s Retirement Research Center found that participants with low-to-moderate incomes did not withdraw significant amounts from their retirement plan accounts. Their research showed that just 5% had taken a withdrawal as of June, with 7% saying they planned to do so later. Instead of plan withdrawals, respondents said they had paused or stopped contributing to the plan (10%), stopped paying bills (8%), borrowed money from friends or family (7%), or sold possessions (7%). The survey’s published results make suggestions about ways employers and providers can help low-to-moderate income employees. For example, they suggest reminding employees about financial wellness resources, and offering highly liquid emergency savings accounts that can help with expenses during a crisis.