Question: During our recent annual plan review, we were happy to see that the majority of our employees have continued to make contributions to their retirement accounts during COVID-19 (and very few took hardship withdrawals). Is this unique to us or was it more of a universal trend?
Answer: Americans continued to save for retirement through DC plans during the first half of this year despite ongoing economic stresses brought about by the COVID-19 pandemic, according to the Investment Company Institute’s “Defined Contribution Plan Participants’ Activities, First Half 2021.” The study tracks contributions, withdrawals and other activity in 401(k) and other DC retirement plans, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans at the end of June 2021. The latest recordkeeper data indicate that plan participants remained committed to saving and investing: a preliminary estimate indicates that only 1.1% of DC plan participants stopped contributing to their plans in the first half of 2021. That compares with 2% in the first half of 2020, and 4.6% in the first half of 2009 (another time of financial stress).
In addition, during the first half of 2021, 2.8% of DC plan participants took withdrawals, the same percentage as in the first half of 2020. Levels of hardship withdrawal activity also were low, with only 1.1% of DC plan participants taking hardship withdrawals during the first half of 2021 — the same share of participants as in the first half of 2020.