The CARES Act: Selected Data on Coronavirus-Related Distribution and Loan Usage in 2020

The CARES Act: Selected Data on Coronavirus-Related Distribution and Loan Usage in 2020

The CARES Act: Selected Data on
Coronavirus-Related Distribution and Loan
Usage in 2020
July 13, 2021
Congressional Research Service
https://crsreports.congress.gov
R46837

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The CARES Act: Select Data on Coronavirus -Related Distribution and Loan Usage in 202

Contents
Introduction ................................................................................................................... 1
Withdrawals and Loans from Retirement Plans .............................................................. 1
Coronavirus-Related Distributions and Loan Provisions in the CARES Act.............................. 2
Selected Data on Coronavirus-Related Distributions and Loan Usage for DC plans ................... 2
Financial Services Firms............................................................................................. 3
Research Organizations .............................................................................................. 4
Thrift Savings Plan .................................................................................................... 5
Data Caveats............................................................................................................. 5

Contacts
Author Information ......................................................................................................... 5

The CARES Act: Select Data on Coronavirus-Related Distribution and Loan Usage in 202

Introduction
Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-
136) waived the 10% penalty for certain early withdrawals from retirement accounts—referred to
as coronavirus-related distributions (CRDs)—and modified rules for loans from defined
contribution (DC) plans in 2020 to try to assist those who may have faced financial difficulties
due to the COVID-19 pandemic.1 Retirement plans were permitted, but not required, to adopt
CRDs and/or the loan provisions. These provisions—which were similar to those enacted
following certain previous federal y declared major disasters—expired in 2020 and, as of the date
of this report, have not been extended by subsequent legislation.
Following enactment of the CARES Act, some expressed concern about the use of the provisions
and the extent to which usage might negatively affect retirement security.2 Selected data on
employers’ adoption and individuals’ utilization of the CARES Act’s CRD and loan provisions in
2020 seems to indicate modest usage of these provisions. This data might be informative to
Congress in understanding retirement account withdrawal and loan behavior during disasters.
Withdrawals and Loans from Retirement Plans
To encourage individuals to save for retirement, Congress authorized and provided tax
advantages for retirement savings plans, such as 401(k) plans and individual retirement accounts
(IRAs). Individuals may withdraw funds from an IRA for any reason, but withdrawals from DC
plans must be al owed by the plan and only in certain hardship situations or after reaching a
specified age. To discourage early withdrawals, IRA and DC plan distributions to individuals
under age 59½ are subject to a 10% early withdrawal penalty. Exceptions apply in the case of
death or disability of the account holder or if the reason for the distribution meets (1) an
exception in Title 26, Section 72(t), of the U.S. Code or (2) a temporary exception in response to
certain specified disasters (e.g., certain hurricanes, flooding, wildfires, and COVID-19).3
Loans are not permitted from IRAs. However, DC plans may al ow participants to borrow from
their accounts. The maximum loan amount is the lesser of (1) half of the participant’s vested
account balance or (2) $50,000. Loans must be repaid in level instal ments over five years.
Longer terms are permitted if loans are used for the purchase or construction of a principal
residence. If default on a loan occurs, the outstanding balance is considered a withdrawal,
included in taxable income, and subject to a 10% penalty if the account owner is younger than
age 59½.

1 For more information on these provisions, see CRS In Focus IF11482, Retirement and Pension Provisions in the
Coronavirus Aid, Relief, and Econom ic Security Act (CARES Act) .
2 See, for example, Amanda Umpierrez, “Despite Challenging Year, CRDs and Plan Leakage Were Sparse,”
PlanSponsor, December 18, 2020, https://www.plansponsor.com/in-depth/despite-challenging-year-crds-plan-leakage-
sparse/; and Vanguard, “ COVID-19, the CARES Act, and Plan Participants’ Response,” October 30, 2020,
https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/
InvComCOVIDCARESPlanParticipantResponse.
3 For a complete list of disaster-related penalty exceptions, see the Appendix of CRS Report RL34397, Traditional and
Roth Individual Retirem ent Accounts (IRAs): A Prim er.
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The CARES Act: Select Data on Coronavirus -Related Distribution and Loan Usage in 202

Coronavirus-Related Distributions and Loan
Provisions in the CARES Act
Section 2202(a) of the CARES Act exempted qualified individuals from the 10% early
withdrawal penalty for CRDs of up to $100,000 from qualified retirement plans (e.g., DC plans
such as 401(k), 403(b), governmental 457(b) plans, and IRAs) from January 1, 2020, and before
December 31, 2020. Unlike hardship distributions, CRDs could be included in taxable income in
2020 alone or included equal y over 2020, 2021, and 2022, and the amount of the CRD may be
recontributed to an individual’s account within three years.4
Section 2202(b) modified rules for DC plan loans for qualified individuals by
 increasing the maximum loan balance for loans taken within 180 days of the
bil ’s enactment (March 27, 2020) to the lesser of (1) the participant’s entire
vested account balance or (2) $100,000; and
 extending the due dates for payments for new or existing loans due on or after the
bil ’s enactment through December 31, 2020, by one year.
Qualified individuals were defined as individuals (1) who tested positive for COVID-19 or those
with a spouse or dependent who tested positive for COVID-19; (2) facing financial difficulties
due to being quarantined, furloughed, laid off, or unable to work due to lack of child care or
reduced work hours as a result of COVID-19; or (3) whose businesses closed or reduced hours as
a result of the COVID-19 pandemic. Internal Revenue Service guidance later expanded the
definition of qualified individuals to include, for example, individuals with reduction in pay and
individuals with spouses or household members who faced financial difficulties as a result of the
COVID-19 pandemic. See CRS Insight IN11441, Internal Revenue Service (IRS) Guidance for
Coronavirus-Related Distributions, Plan Loans, and Required Minimum Distribution (RMD)
Rollovers for a complete definition of qualified individuals.
Selected Data on Coronavirus-Related Distributions
and Loan Usage for DC plans
To obtain data on adoption and usage of the CARES Act provisions, CRS examined reports from
various financial services firms, and research organizations and the federal government’s Thrift
Savings Plan (TSP). As such, this report is not a comprehensive analysis of DC participant
behavior. In 2018 (the most recent year for which data is available), DC plans had nearly 106
mil ion participants (about 83 mil ion of which were active participants).5 In addition, as of the
date of this report, CRS has not identified any data on CRD usage from IRAs.

4 Previous temporary penalty exceptions for certain federally declared disasters also included these income inclusion
and recontribution rules.
5 See Employee Benefits Securities Administration, “Private Pension Plan,” January 2021, p. 3, https://www.dol.gov/
agencies/ebsa/researchers/statistics/retirement -bulletins/private-pension-plan. Active participants includes (1) those
who are eligible to elect to have their employers make payments to 401(k)-type plans (even if individuals are not
contributing) and (2) nonvested individuals who are earning or retaining credited service under th ose plans.
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The CARES Act: Select Data on Coronavirus -Related Distribution and Loan Usage in 202

Financial Services Firms
Financial services firms provide, administer, or keep records for DC plans. Several of these firms
published information about CARES Act provision adoption and usage.6 Differences among
financial services firm data regarding employer uptake of CRDs and loan provisions could be due
to differences in employer characteristics or other factors.7
Based on an analysis of 25.8 mil ion participants, Fidelity—the largest DC plan recordkeeper—
found the following:8
 6.3% of eligible participants took CRDs in 2020. Fidelity noted that of the 22% of
participants who took money from their plans in 2020, nearly 1 in 4 used the CARES
Act.9
 In Q4 2020, 9% of participants took money out of their accounts, and CRDs
represented 33% of the total dollar amount withdrawn.10 In Q4 2020, the average
CRD amount was $7,600, and the median CRD amount was $1,600.
 18% of eligible participants had outstanding loans as of Q4 2020, which was
lower than the percentage with outstanding loans in previous years.11
Empower Retirement—the second-largest recordkeeper with nearly 12 mil ion participants—
reported that:
 4.4% of eligible participants took CRDs in 2020 (corresponding to more than
500,000 withdrawals).12
Vanguard—the fourth-largest recordkeeper with over 16 thousand plan sponsors covering 5.5
mil ion participants—reported that 73% of its plan sponsors permitted CRDs and that 5.7% of
eligible participants in these plans took CRDs. Vanguard also found that:
 The average CRD was $15,700, and the median CRD was $6,500. Participants
between the ages of 35 and 54 and participants with an income between $30,000,
and $75,000 were more likely to take CRDs than were other age and income
groups, respectively.13

6 Organizations varied in the information they provided about provision usage. For example, some firms provided data
on employer uptake, while others did not . Data points may not be directly comparable from firm to firm.
7 An April 2020 survey included a question about the actions taken by plan service providers/recordkeepers. It found
that, among all surveyed plans, 30.5% of plan service providers/recordkeepers defaulted the plan to incorporate all of
the CARES Act retirement account provisions, 57.6% waited for direction as to which CARES Act provision(s) the
plan would adopt, and 6% added some provisions by default and waited for direction on others. See Plan Sponsor
Council of America, CARES Act Snapshot Survey, https://www.psca.org/research/cares_snapshot .
8 See Pensions & Investments, “DC Record Keepers,” https://researchcenter.pionline.com/v3/rankings/dc-record-
keeper/datatable?utm_content=special_report.
9 See Fidelity Investments, “Building Financial Futures,” 4th Quarter 2020.
10 Fidelity Investments, “Building Financial Futures.” T he remaining two-thirds of the total dollar amount withdrawn
was from automatic payments (25%), full payouts (16%), loans (10%), partial withdrawals (14%), and hardship
withdrawals (2%).
11 Fidelity Investments, “Building Financial Futures.”
12 See Empower Institute, “For Retirement Savers, Hindsight Is ‘2020,’” June 2021, https://www.empower-
retirement.com/empower-institute/retirement-savers-hindsight -2020.
13 Vanguard, “Revisiting the CARES Act and Its Impact on Retirement Savings,” January 28, 2021,
https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/
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The CARES Act: Select Data on Coronavirus -Related Distribution and Loan Usage in 202

 Less than 1% of eligible participants took CARES Act loans as of October 30,
2020.14
Vanguard asserted that “while there have been negative impacts on retirement readiness, the
response from participants has been better than expected, a finding for which plan sponsors can
take some credit.”15
T. Rowe Price, which services more than 2.2 mil ion participants in nearly 6,000 plans, reported
that two-thirds of its client plans with assets greater than $25 mil ion adopted at least one of the
CARES Act provisions.16 In addition,
 6% of participants took CRDs, CARES Act loans, or suspended loan repayments
as of September 2020.17
 Among participants with outstanding loans (in plans that adopted the loan
provisions), 8.2% suspended their loan repayments.18
Ascensus, based on a study of retirement plans with 500 employees or fewer, reported that:
 Overal , 16.6% of employers adopted CRDs, and 9.9% of employers adopted the
loan provisions. Larger employers were more likely to adopt the CARES Act
provisions.19 Ascensus noted that “over the course of 2020, we saw moderate to
low employer adoption of CARES Act distribution and loan options relative to
early industry projections.”20
 4.9% of eligible individuals (i.e., individuals in plans that adopted the CARES
Act provisions) took CRDs, and 1.4% of eligible individuals used the loan
provisions through September 2020 (when the increased loan limit ended).21
Research Organizations
Various research organizations conduct surveys about DC plan recordkeepers and plan sponsors.
 An Investment Company Institute (ICI) survey of a cross-section of
recordkeepers representing a range of DC plans that cover more than 30 mil ion

InvComRevisitCARESActImpact .
14 Vanguard, “COVID-19, the CARES Act, and Plan Participants’ Response,” October 30, 2020,
https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/
InvComCOVIDCARESPlanParticipantResponse.
15 Vanguard, “ COVID-19, the CARES Act, and Plan Participants’ Response.”
16 T . Rowe Price, “How the Coronavirus Pandemic Is Affecting Retirement Saving,” September 2020,
https://www.troweprice.com/content/dam/retirement-plan-services/pdfs/insights/research-findings/
Coronavirus_Affect_on_Retirement_Saving.pdf.
17 T . Rowe Price, “How the Coronavirus Pandemic Is Affecting Retirement Saving.” T . Rowe Price reported that
“although two-thirds of T . Rowe Price’s clients have adopted at least one of the CARES Act provisions to date, only
6% of participants have either taken a coro navirus-related loan, coronavirus-related distribution, or suspended their
loan repayments.”
18 T . Rowe Price, “How the Coronavirus Pandemic Is Affecting Retirement Saving.”
19 Among plans with 101 or more participants, 45.2% adopted CRDs and 26.3% adopted the loan provisions. Among
plans with 25 or fewer participants, 10.2% adopted CRDs and 6.1% adopted the loan provisions. See Ascensus, “ T he
State of Savings,” December 2020, https://www2.ascensus.com/wp-content/uploads/2021/03/Ascensus_State-of-
Savings_December-2020.pdf.
20 See Ascensus, “T he State of Savings.”
21 Ascensus, “T he State of Savings.”
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The CARES Act: Select Data on Coronavirus -Related Distribution and Loan Usage in 202

participants found that 5.8% of DC plan participants took CRDs.22 ICI also
reported that 14.8% of DC plan participants had outstanding loans at the end of
2020, compared to 16.1% at the end of 2019.23
Thrift Savings Plan
TSP, the DC plan for federal employees, is the largest DC plan in the United States. In December
2020, TSP had 4.3 mil ion active participants.24 TSP adopted both the CRD and loan provisions
and found that:
 119,720 participants requested CRDs through December 2020 (corresponding to
about 2.8% of active participants).25
 16,663 participants (corresponding to about 0.4% of active participants) took
CARES Act loans from June 15 (when TSP adopted the provision) through
September 22, 2020 (when the provision ended). An additional 3,028 participants
took out loans over $50,000 during this time period.26
Data Caveats
Not al CRDs have been included in the selected data provided in this report. For example,
qualified individuals who separated from the employers sponsoring their DC plans and received
distributions could have treated al or part of the distributions as CRDs, or they could have rolled
over their savings to IRAs and then taken CRDs. Qualified individuals who received non-CRD
distributions (e.g., a hardship distribution, perhaps because their plans did not adopt the CRD
provision) could treat them as CRDs. These distributions would likely not be captured as CRDs.
In addition, data in this report is from selected recordkeeping firms and does not cover al DC
plan participants. Though this data may suggest modest usage of CARES Act provisions, a
comprehensive analysis of CRD and loan usage in 2020 may benefit from incorporating
administrative data (including data on IRA withdrawals).

Author Information

Elizabeth A. Myers

Analyst in Income Security

22 See ICI, “Defined Contribution Plan Participants’ Activities, 2020,” February 2021, https://www.ici.org/pdf/
20_rpt_recsurveyq4.pdf.
23 ICI, “Defined Contribution Plan Participants’ Activities, 2020.”
24 See T hrift Savings Fund Statistics December 2020, Federal Retirement T hrift Investment Board Meeting Minutes,
January 2021, https://www.frtib.gov/pdf/minutes/2021/Jan/MM-2021Jan-Att1b.pdf. In December 2020, T SP had 3.8
million contributing participants and 0.5 million non -contributing participants. T his number does not include the
Federal Employees’ Retirement System agency contributions only.
25 Ibid.
26 See T hrift Savings Fund Statistics Highlights, https://www.frtib.gov/pdf/minutes/2020/Dec/MM-2020Dec-Att1a.pdf.
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The CARES Act: Select Data on Coronavirus-Related Distribution and Loan Usage in 202

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