The SPARK Institute wondered how its members were responding to the crisis and implementation of the CARES Act—so it asked.
The responses from recordkeepers and other industry investment/service providers were complied with the help of the Defined Contribution Institutional Investment Association (DCIIA), and included the following:
Recordkeeper insights
Recordkeepers are adjusting their processes to accommodate coronavirus-related distributions. These recordkeepers are tracking distributions and two-thirds are accepting self-attestations from participants that they meet the eligibility requirement.
Over 80% of those surveyed have already updated their systems and procedures to accommodate the CARES Act. Another 9% should be updated within a week.
The volume of distribution requests and questions is up significantly. Still, more than two-thirds of the industry is meeting its service level agreements (SLAs) to clients.
None of the surveyed companies has plans to lay off or reduce staff, but many have imposed hiring freezes on certain business units.
To address shelter-in-place rules and social distancing guidelines, 98% of the industry is now working from home. This is up from 20% in January.
The transition to working from home caused minimal disruption since the industry has had work from home procedures in place for more than a decade.
To address the increase in employees working from home, recordkeepers have responded with an increased focus on cybersecurity, supplying employees with the necessary technology, and online team calls.
Plan sponsor and participant insights
Those surveyed indicated that according to their data, approximately half of plan sponsors are considering reducing employer contributions until the crisis is over.
To help avoid this, recordkeepers and plan sponsors are also having discussions about alternative tactics to help address plan expense and cash flow concerns.
For example, forfeiture accounts and ERISA budget accounts can be leveraged by plan sponsors to help pay some plan expenses. Additionally, many plan sponsors previously considering an RFP process have decided to put that process on hold.
With so many of their employees now working from home, some plan sponsors are concerned with managing paperwork and required document signatures, payroll and staffing issues, and a lack of necessary technology infrastructure.
Unlike in the 2009 financial crisis, most participants are not shifting their investments, but instead are looking for loans or hardship withdrawals. For those participants that are moving assets, the shift is toward fixed income products.
“Our industry recognizes the need many Americans have for access to their savings as they face these challenging times, so our industry is working diligently to provide that access to workers,” Tim Rouse, Executive Director of the SPARK Institute, said in a statement. “When this crisis passes and Americans can turn their attention to saving for their retirement, these same firms will be there to once again support these workers.”
“Many of us are experiencing echoes of the 2008-2009 crisis, although this time is markedly different both in the origins of the crisis and the rapidity of the economic fallout,” Lew Minsky, President and CEO of DCIIA, added.