A majority of U.S. companies are making it easier for employees to access their 401k plans’ assets even as some companies are cutting matching contributions amid the COVID-19 pandemic, according to Willis Towers Watson
The survey also revealed companies are increasing their emphasis on financial wellbeing resources to help workers cope during the crisis.
Many employers are making adjustments to their 401k plans as a result of the CARES Act, the law designed to help protect American workers from the economic impact of COVID-19.
Almost two-thirds of respondents increased access to in-service distributions from participants’ 401k accounts while 16% either plan to or are considering doing so this year.
Nearly as many (64%) are now allowing participants to defer loan repayments while 48% increased the maximum amount available for plan loans. Another 17% are planning or considering making either adjustment this year.
“These are difficult times emotionally and financially for many employees,” Robyn Credico, North America Defined Contribution practice leader with Willis Towers Watson, said in a statement. “Making cash available from defined contribution plans is an easy, relatively inexpensive way to provide much-needed assistance to employees. This comes at a time when some organizations are having to reduce their own spending on retirement benefits. The more distressed companies cut contributions to their plans in an effort to reduce costs, similar to what we saw during the financial crisis of 2008.”
Matching programs
Just 12% of employers suspended their matching contributions, but 23% are either planning to or considering doing so this year.
Interestingly, significantly more companies in hard-hit industries, including retail and business services, made cost-cutting changes. One-quarter of these companies suspended their matching contributions; nearly a third (32%) either will or may do so this year.
Recognizing that the economy may be hitting their employees hard, one-third of survey respondents (33%) cited supporting their employees’ financial wellbeing as one of their top three benefit priorities for the next six months.
And many of them are taking action.
More than six in 10 said they promoted existing financial counseling resources, including 401k vendors and investment advisors for their employees; another 20% will or may do so.
About half raised awareness of emergency cash sources, such as loan products, defined contribution hardship withdrawals and loans, and health savings accounts; another 29% will or may do so.
Nearly one in 10 has introduced new financial counseling resources, and about a quarter plan to introduce or are considering new resources in 2020.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
