COVID-19 news & guidance

The economic impact of the COVID-19 pandemic has been felt far and wide, both in the U.S. and globally. But what has it meant for tax-advantaged savings levels in vehicles such as retirement , 529, and health savings & flexible spending accounts? Our proprietary data, tracked over the course of 2020, reveal shifts in contribution and withdrawal behaviors by business owners and individuals in response to the financial challenges posed by the pandemic. Overall, these insights suggest a continued appreciation for the importance of savings and the ability to access these savings when needed.

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.

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. Throughout the summer months, we've started to see some very early signs of 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 reopenings 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.

View and download the complete State of Savings report here.

Rep. Sean Maloney (D-NY) has introduced H.R. 7645, legislation that would extend the time period for taxpayers to withdraw coronavirus-related distributions (CRDs) from retirement savings arrangements and receive the special tax benefits that CRDs provide. Certain withdrawals could be tax-free under the legislation.

Our proprietary data reveals how Americans changed their savings behaviors over the course of the COVID-19 outbreak as business and travel restrictions disrupted the U.S. economy. These insights serve as an early baseline for the evolution of savings plan contribution and withdrawal behaviors in response to the pandemic and subsequent passage of the CARES Act. We expect to see new trends emerge as financial markets continue to rebound and stabilize and as states across the nation gradually reopen their economies.

Scheduled for publication in next Tuesday’s Federal Register is a Small Business Administration (SBA) interim final rule on the agency’s Paycheck Protection Program (PPP). This guidance is being issued in response to enactment on June 5 of the Paycheck Protection Program Flexibility Act of 2020, legislation that made enhancements to this SBA loan program intended to help small employers meet payroll and other expenses as they deal with the economic effects of the novel coronavirus (COVID-19) pandemic.

President Trump signed into law Friday, June 5, the Paycheck Protection Program Flexibility Act of 2020, legislation that the Senate approved Wednesday night. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.

The Internal Revenue Service (IRS) today issued Notice 2020-42, in which the IRS provides temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax-favored retirement arrangements. This includes signatures of those making an election that ordinarily would need to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

On Wednesday night, the U.S. Senate approved by voice vote H.R. 7010, the House-passed Paycheck Protection Program Flexibility Act of 2020. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act, to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.