Were Participants Shaken or Stirred in 2018?

So, how – or did – the volatility in the markets affect participant activity in 2018?

Not very much, according to a new report. In fact, defined contribution plan participants pretty much kept on doing what they were doing, according to “Defined Contribution Plan Participants’ Activities, 2018” from the Investment Company Institute. 

Consider that:

• In 2018, 3.4% of DC plan participants took withdrawals, the same share as in 2017. 
• Only 1.6% of DC plan participants took hardship withdrawals during 2018 – compared with 1.7% in 2017.
• At the end of December 2018, 16.7% of DC plan participants had loans outstanding – identical to the level at year-end 2017, and down (slightly) from the 17.0% recorded at year-end 2016.

ICI notes that 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 15.8% at the end of 2008 to 18.5% in 2011, at which point it levelled out in 2012 through 2015. As for that seasonal pattern, ICI notes that loan activity appears to have a quarterly seasonal pattern: The percentage of DC plan participants with loans outstanding in the first quarter of the year tends to be lower compared with later quarters.

Other Changes

In 2018, 2.3% of DC plan participants stopped contributing, but that was actually an improvement from a year ago, when 2.7% stopped. However, ICI notes that it is possible that some of these participants stopped contributing simply because they reached the annual contribution limit.

In 2018, 9.7% of DC plan participants changed the asset allocation of their account balances and 5.1% changed the asset allocation of their contributions – both levels comparable to that of 2017.

All in all, as is often the case, it seems to have been status quo for DC plan participants in 2018. And, for the most part, that seems to have been a good thing.