State of Savings

The pandemic caused notable shifts, but now with re-openings data suggests positive signs of savings 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 re-openings 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.

 The Employer Perspective

• 11.4% decrease in employer contributions. March through May based on projections, with early indications of some recovery by the end of May

This decrease was driven by business interruptions or closures and decreased matching and profit sharing contributions as a function of fewer employee contributions

• 11.8% of employers had stopped or decreased their match as of the end of May.
• Positively, 7.5% of employers that decreased their match in or after March returned to pre-March levels in May.

The Savers Perspective

In January through May 2020:

• 1.3% discontinued, electing a 0% savings rate 1.8% reduced their savings rate
• 3.8% increased their savings rate

Overwhelmingly, 93.1% of savers made no change to their savings rates, illustrating the positive value of automatic payroll deduction and suggesting that savers could be using other means to manage financial needs through this period.

• 5.3% of savers stopped contributing, including 1.3% who discontinued contributions and those who were furloughed or terminated

For those still saving, the average amount contributed increased slightly in May and is in line with projections. This suggests that those who have stopped contributing or decreased their savings rate have had lower salaries on average.

CARES Act Adoption

Employer adoption of coronavirus-related distributions (CRDs) and expanded loan options offered through the CARES Act remains relatively low; however, it grew steadily through the end of May, with adoption of loans lower than that of CRDs. In both cases, larger plans are adopting at a significantly higher rate than the smallest plans (25 or fewer savers).

• 11.7% of employers have adopted the CRD option
• 1 in 3 employers that adopted CRDs have had at least one saver take advantage of the provision
• 1 in 3 employers that adopted CRDs have had at least one saver take advantage of the provision
• 1 in 6 employers that adopted expanded loans have had at least one saver take advantage of the provision