12/01/2020 | Press release | Distributed by Public on 12/01/2020 10:31
Pandemic's economic effect on plans more pronounced in health care and education sectors
The vast majority (83.6%) of non-profit organizations with 403(b) plans are holding steady and not changing their contribution levels despite the financial pressures of the COVID-19 pandemic, according to a new Plan Sponsor Council of America (PSCA) snapshot survey, sponsored by Principal Financial Group®.
'The survey shows that while most non-profits have been able to sustain their commitment to retirement plan contributions, those in the health care and education sectors have been disproportionally affected by the pandemic,' said Hattie Greenan, director of research and communications at PSCA. 'Those organizations are more likely to be considering reducing or suspending plan contributions and, at the same time, workers in those sectors were noticeably more likely to have taken loans and withdrawals from their retirement savings.'
PSCA conducted a snapshot survey of nearly 300 non-profit organizations in October 2020 to determine what impact the COVID-19 pandemic and resulting economic conditions are having on 403(b) plans and their participants.
'Through this pandemic, we have seen the adaptability of employers and employees in the non-profit sector,' said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions at Principal®. 'We are seeing consultants and financial professionals help employers navigate decisions about their retirement plans and ensure that employees' savings needs are being considered.'
Employer contributions percent of changes being made or planned to employer contributions by year-end as a result of the COVID-19 pandemic
The vast majority of organizations (83.6%) will not be changing the employer contributions to 403(b) plans this year. However, nearly a third of higher education institutions say they either have, or will by year-end, reduce or suspend contributions to their 403(b) plans. Ten percent of all respondents have suspended or reduced the matching contribution and 7.5% have suspended or reduced the non-matching contribution (some plans have both types of contributions).
Loans and withdrawals
Percent of non-profit organizations noting increase in hardship withdrawals since COVID-19 by industry type
Similarly, while three-fourths of plans indicated they have not noted an increase in plan loan activity since the beginning of COVID-19, just more than a third (36.0%) of hospitals and health care organizations noted an increase, as did nearly 30% of higher education institutions. However, those sectors were a relatively small sampling of the overall survey.
While more than 70% of organizations reported no change in the volume of hardship and in-service withdrawals this year, more than half (52.2%) of hospital and health care systems did cite an increase in participants tapping their accounts. More than a third of higher education institutions also noted an increase.
'These findings, with most organizations making no changes to their retirement benefits and contribution levels, are reflective of what we see at Principal,' said Morris. 'Employers continue to see the value of supporting employees to pay their future selves.'