Data & Research August 12, 2016

DC Participant Withdrawal Activity Down in Q1 2016

Participants with outstanding loans is also down from a year ago, according to ICI data.

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DC plan participants’ withdrawal activity during the first quarter of 2016 was similar to activity observed during the first quarter of the prior year, data from the Investment Company Institute (ICI) shows.

In the first quarter, 1.1% of DC plan participants took withdrawals from their DC plan accounts, down from 1.3% in Q1 2015, and 0.4% took hardship withdrawals, the same percentage as in the first quarter last year. Seventeen percent of DC participants had loans outstanding in the first quarter of this year, compared to 17.4% in the first quarter of last year.

ICI says two factors appear to influence DC plan participants’ loan activity: reaction to financial stresses and a seasonal pattern. Likely responding to financial stresses, the percentage of DC plan participants with loans outstanding rose from the end of 2008 (15.3%) through 2011 (18.5%). This pattern of activity is similar to that observed in the wake of the bear market and recession earlier in the decade. The share of DC plan participants with loans outstanding then leveled out in 2012 through 2015, perhaps reflecting loans supporting consumer spending or home purchases.

ICI’s recordkeeper data shows only 1.1% of DC plan participants stopped contributing in Q1 2016, compared to 1% in Q1 2015. ICI notes it is possible that some of these participants stopped contributing simply because they reached the annual contribution limit.

The survey of recordkeeping firms also gathered information about asset allocation changes in DC account balances or contributions. During the first three months of the year, 4.3% of DC plan participants changed the asset allocation of their account balances, the same share as in the same period in 2015. Reallocation activity regarding contributions was higher in Q1 2016 than the level observed in recent periods: 5.2% of DC plan participants changed the asset allocation of their contributions in Q1 2016, compared with 4.2% in Q1 2015, 4.5% in Q1 2014, and 4.8% in Q1 2013.

ICI’s report of DC plan participant activity in the first quarter of 2016 is here.