Q: Hi Erick, 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?
A: I looked into it and 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.
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©2020 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.