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Pandemic Downturn Hits Small-Business Retirement Plans Hardest

They stopped contributions to plans at five times the rate of bigger firms

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En español | While most workers are still trying to save for retirement during the recession triggered by the COVID-19 pandemic, the amount of money going into employer-sponsored retirement plans has dropped due to layoffs and business losses that forced some companies to reduce or stop matching contributions. Small firms and their employees have been hit the hardest, according to a study from Ascensus, which does record-keeping and administration for corporate retirement plans.

In the study of companies with up to 500 employees, Ascensus found that employer contributions decreased 11.4 percent overall from March through May, as a result of factors including business closures, interruptions and layoffs, which meant fewer workers’ savings needed to be matched. Ascensus offers services to more than 116,500 retirement plans with 11 million–plus employee participants.


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Just 1.4 percent of employer plans discontinued matches altogether, but plans with 25 or fewer participants stopped contributions at five times the rate of those with 100-plus participants.

Workers are still trying to put aside money for retirement, and companies are trying to help them. Almost all — 93.1 percent — of employees who hang on to their jobs continue to contribute to their retirement plans at the same rate, and only 11.8 percent of employers were in such financial difficulty that they had to decrease or stop their matches.

The federal Coronavirus Aid, Relief and Economic Security (CARES) Act gives employer-sponsored savings plans the option of making penalty-free early distributions to workers who've become ill or suffered adverse financial effects from the pandemic; it also allows plans to offer more time for workers to repay loans from their retirement savings. The study found that 35.1 percent of plans sponsored by companies with 100 or more employees are offering those CARES Act breaks, but just 3.8 percent of plans with 25 or fewer participants are doing it.

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