“The response of defined contribution plan sponsors to the CARES Act was primarily influenced by the industry they are in and the actions taken by their recordkeeper,” a new Callan survey notes.
It found that 21% of the DC plan respondents had taken some type of workforce action, including salary reductions, layoffs, or furloughs.
A third of recordkeepers added the capability for coronavirus-related distributions across all the plans they served—and required sponsors to opt-out if they did not want to offer this option. The other recordkeepers required sponsors to opt-in.
Fully 53% of recordkeepers automatically waived minimum required distributions, which the CARES Act permitted for calendar year 2020, and 64% of recordkeepers had already instituted DC plan loan deferment provisions permitted by the CARES Act.
Callan conducted the survey in mid-April to assess what DC plan sponsors have done in response to the CARES Act and the recent economic turmoil spurred by the COVID-19 pandemic. The survey includes responses from 63 non-government plan sponsors and surveyed 15 DC recordkeepers.
Thankfully, the vast majority of sponsors said they had no plans to suspend or reduce their matching contribution. This was especially so for plan sponsors with a union population. However, sponsors that had taken some sort of workforce action were more likely to have either suspended or reduced the match.
The bottom line
The bottom line, according to Callan, is that aside from the grave threat to public health and the resulting impact on economic conditions, one of the greatest challenges COVID-19 presents is the lack of a clear timeline and endpoint.
“Plan sponsors and participants are seeking to make decisions based on circumstances that cannot be anticipated,” Callan’s Jana Steele writes. “Plan sponsors should seek to support their participants’ current needs, balanced with the long-term objectives of the DC plan as required by ERISA, while documenting their fiduciary decisions and the process to implement those decisions.”
READ THE FULL SURVEY RESULTS HERE
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.
