The CARES Act: One month later

May 22, 2020

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The flexibility provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March, allows for additional financial options for workers with retirement savings to prepare for unforeseen circumstances related to COVID-19. While this added flexibility is helpful to many workers, the vast majority of participants in Vanguard-recordkept plans have not needed to access their retirement savings during this crisis and are staying the course on their journey to retirement.

Immediately following the passage of the bill, Vanguard proactively consulted with many of our plan sponsors to discuss the provisions. We provided an election form that allowed these sponsors to select the optional provisions they wanted to implement in their plan. As of the end of April, nearly 60% of all of our plan sponsors returned their completed form, giving us a window into how plans are responding to the Act.

We've detailed the CARES Act's important provisions here.

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The following highlights plan and participant responses to those provisions as of the end of April 2020.

Coronavirus-related distributions: Optional provision

Plan adoption

Of plans that submitted an election form, 99% allowed for coronavirus-related distributions (CRDs), and the majority (82%) of plans extended the provision to all participants—both those who are currently employed and those who have left employment.

Participant adoption

Of participants (in plans that permit them), 0.9% initiated a CRD. The average CRD amount was $19,000, and, on average, these CRDs represented approximately 60% of the total participant balances. Overall, 57% of participants who initiated a CRD withdrew more than 50% of their total account balance; however, only 3% of all CRDs were for the maximum amount of $100,000.

Cares Act Info1

Source: Vanguard. As of April 30, 2020.

CARES Act loan provisions: Optional provision

Plan adoption

Of plans that submitted an election form, 67% allowed for the expanded loan limits.

Participant adoption

Less than 0.1% of participants (in plans that permit them) initiated a loan based on the expanded loan limits. The majority (80%) of these loans were issued above the 50% of total vested account balance limit, with only 20% issued for amounts above $50,000.

In addition to the expanded loans, 2% of participants with an existing loan requested to delay repayments for a year.

Cares Act Info2

Source: Vanguard. As of April 30, 2020.

Required minimum distributions: Required provision

Participant adoption

Of all participants who would have otherwise had to take a required minimum distribution (RMD) in 2020, 3% have delayed it.

Cares Act Info3

Source: Vanguard. As of April 30, 2020.

More data to come

The past few months have brought unprecedented challenges to all parts of the globe. Increased uncertainty exists in various forms, from concerns about the virus to macroeconomic activity to individual financial budgets.

We are heartened by early data showing that while a majority of plans have adopted optional provisions allowing for greater access to retirement savings, the vast majority of participants have not exercised that flexibility. However, we will continue to monitor plan activity and expect to provide more extensive insights in the months to come. In the meantime, if you have any questions about the CARES Act, please contact your Vanguard representative.


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