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The CARES Act is around 7 months old and it is still prompting plan sponsor and plan participant activity, although most are largely staying the course during the COVID-19 pandemic.
Enacted in March, the CARES Act offers provisions employers can choose to offer to employees who have been impacted financially by the crisis include adding COVID-19-related distributions (CRDs), waiving required minimum distributions (RMDs) for 2020, and increasing loan limits.
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What plan sponsors are doing
More than half of plan sponsors have responded to the CARES Act, according to a recent study by Principal Financial Services. Almost all of those who have responded have adopted all three provisions of the legislation.
Clients in Principal's emerging segment were most likely to adopt all of the provisions, with 95 percent of those who have responded choosing to activate all three. About three-quarters of institutional clients and 89 percent of dynamic clients who responded to the Act have elected to adopt all three provisions.
Adoption of all three provisions was highest among finance and insurance clients (92 percent), followed by professional and scientific (85 percent); health care and social (78 percent); and manufacturing (72 percent).
Principal said plan sponsor activity in September was similar to August, which it characterized as slow. Nearly half of plan changes recorded during the month involved adding an employer match.
Since March 11 when the pandemic started, about 1.2 percent of plan amendments have involved a change to an employer match, with 81 percent stopping their match and 7 percent adding a match.
What participants are doing
The company said participants continue to show steady interest in CARES Act provisions, especially regarding withdrawals, based on mobile and web visits as well as call volume during September.
The most visited web pages among participants after the entry page were loan/withdrawal summary pages, contributions summary pages and investment details pages.
In addition, call volume was up 27 percent during September compared with the same month last year, and call duration also remains up nearly 22 percent, said Principal. The company reported participants are interested in a typical mix of topics when they call, with the exception of calls about withdrawals, which are more than double what they were in September 2019.
Nearly all (99 percent) of plan participants maintained their rate of contribution during September, said the report. Of plan participants who did make changes to their account, most decreased their contribution, said Principal, although the rate of contribution decreases has slowed since the start of the pandemic.
Loan requests
Loan requests were up about 4.5 percent year over year in September, although loan requests year to date are down 16 percent. About 5 percent of participants with a CRD available have taken one since they became available in March.
The average amount taken for CRDs is $16,500, and most CRD requests have come from participants in the manufacturing, health care and professional/scientific industries.
Investment activity
Participants largely maintained their investments in September, although transfers ticked up slightly from 0.4 percent in September 2019 to 0.6 percent in September 2020. Most transfer activity favors stable or conservative investments, said Principal. Investment options that gained assets during the month were bonds as well as fixed income and stable value funds.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM's Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.
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