At a Glance | September 3, 2020 How Might Taking Coronavirus-Related 1 Distributions Impact Retirement Benefits? The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows greater access to defined 2 contribution plan balances. EBRI considers the impact on the future retirement security of American workers. IMPACT OF WITHDRAWALS Median Reduction in Retirement Balances as a Multiple of Pay at Age 65 Employees Taking Full Withdrawal (up to $100,000) in 2020 With No Payback WITH NO PAYBACK If all workers take a By Current Age coronavirus-related distribution Overall 25–29 30–34 35–39 40–44 45–49 50–54 55–59 60–64 and fail to repay it, the overall reduction in retirement Projected Reduction in balances is projected to be 20 Retirement Balances percent. The lowest age groups –10% are least impacted — in part –14% because their current account –17% –18% –20% –20% balances are too small for them –24% to take the full $100,000 distribution. –30% –45% Comparison of Median Reduction in Retirement Balances CONDITIONAL VS. AGGREGATE 3 Conditional vs. Aggregate Impact Even in the case where Conditional Impact Aggregate Impact employers offer the CARES Act • Employers offer the provision The aggregate impact is based on • provisions, employees are Employees are eligible for it assumptions from a PSCA survey of • Employees take maximum advantage 137 organizations’ actual CARES eligible to take the loans or Act provision implementation. Scenarios distributions, and employees do Employees taking full so up to the maximum, the withdrawal up to $100,000, impact of the provisions is –20.0% –0.43% no payback mostly modest — unless 8080 20++20 100100 employees fail to repay their withdrawal or continue to take Employees taking full CARES-Act-type withdrawals withdrawal up to $100,000, –2.3% –0.05 –0.05% % with three-year payback with no payback over time. Because many employers have 9797 +33+ 100100 not implemented the CARES Employees taking new loans Act provisions and few up to $100,000 in 2020 with –5.9% –0.03% employees actually take dollar-for-dollar employee contribution offset against new advantage of them, the 9494 ++66 100100 loan payments aggregate impact is likely to be Employees taking full small in every scenario. withdrawal up to $100,000, –54.0% –1.16% every 10 years, no payback 4646 5454++ 100100 1. Using EBRI’s Retirement Security Projection Model® (RSPM), we simulate the impact on retirement balances as a multiple of pay at age 65 for scenarios where employees take full advantage of the CARES Act flexibility to access their defined contribution plan. 2. The CARES Act allows for increased loan limits, suspended loan payments, and coronavirus-related distributions with repayment over a three-year period. 3. The aggregate impact uses assumptions based on a snapshot PSCA survey of plan sponsors conducted in early June 2020 that asked what changes they made regarding the CARES Act and the COVID-19 pandemic. SOURCE: Jack VanDerhei, “CARES Act: Implications for Retirement Security of American Workers,” EBRI Issue Brief, no. 509 (Employee Benefit Research Institute, July 30, 2020). © 2020 EBRI This report is copyrighted by the Employee Benefit Research Institute (EBRI). You may copy, print, or download this report solely for personal and noncommercial use, provided that all hard copies retain any and all copyright and other applicable notices contained therein, and you may cite or quote small portions of the report provided that you do so verbatim and with proper citation. Any use beyond the scope of the foregoing requires EBRI’s prior express permission. For permissions, please contact EBRI at permissions@ebri.org.