A recent survey by the Plan Sponsor Council of America focused on the impact the coronavirus (COVID-19) pandemic has had on 403(b) retirement savings plans. Overall, the survey showed many employers sponsoring a 403(b) plan were not making changes to plan provisions and did not see a significant increase in loan and hardship activity. However, higher education stood out as one industry that has been impacted more than others.
Of the 270 survey respondents, 55 (20.4%) were from higher education. The total survey responses indicated that 16.9% of plan sponsors were making changes to their employer contributions by the end of the year. The number of higher education institutions changing employer contributions was nearly double that at 29.1%. In addition, the number of higher education institutions considering other plan changes because of the pandemic was 10.9%.
Higher education also saw increases in loan and hardship activity that was higher than the average. 28% of higher education respondents noted an increase in loan activity and 36% noted an increase in hardship or in-service withdrawals. Only healthcare and hospitals were higher, noting a 35% increase in loan activity and a 52% increase in hardship and in-service withdrawal activity.
Our firm provides investment advisory services to many higher education clients. Several clients have taken steps to reduce or eliminate employer contributions or have made plan amendments to allow for such action in the future. Most institutions plan to reinstate the full employer contribution at some point, but it is not always clear when that will happen. Higher education typically has above average retirement plan contributions. The impact of reducing or removing that contribution could have a long-term impact on individuals retirement savings as well as the timing of their retirement.
To read the full survey by the Plan Sponsor Council of America, click here.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.