Recent data from the Investment Company Institute (ICI) indicates that despite the CARES Act making it easier to tap 401(k) retirement accounts early, few have actually done so.

Among its many provisions, the CARES Act allows up to $100,000 in aggregate distributions from all plans maintained to be treated as a "coronavirus-related distribution," meaning that the rules normally governing what is and is not a tax-free distribution, 72(t), will not apply. In fact, "if a distribution to an individual would ... be a corona-virus-related distribution, a plan shall not be treated as violating any requirement of the Internal Revenue Code of 1986 merely because the plan treats such distribution as a corona-virus-related distribution unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled groups which includes the employer) to such individual exceeds $100,000."

The ICI data tracks contributions, withdrawals, and other activity in 401(k) and other direct contribution retirement plans, based on plan record-keeper data covering more than 30 million participant accounts in employer-based direct contribution plans at the end of June 2020. It found that just 2.9 percent of plan participants took coronavirus-related distributions during the first half of the year.

The ICI also found that only 2.0 percent of plan participants stopped contributing to their plans in the first half of 2020, a typical rate across the majority of the 12 years that the ICI has tracked such data. That compares with 1.3 percent in the first half of 2019, and 4.6 percent in the first half of 2009 (another time of financial stress).

“These data reflect the long-term mindset of retirement savers,” said Sarah Holden, ICI senior director of retirement and investor research. “We see a slight increase in withdrawal activity following the onset of economic volatility and hardship, but the increase is much smaller than you might expect, given the severity of the COVID-19 economic downturn. These assets represent a pot of money that savers have earmarked for retirement and they have consistently demonstrated that they generally stay the course to reach that financial goal, even during challenging economic situations.”