COLLECTED WISDOM™ on the Coronavirus Pandemic and 401k Plans
This page gathers relevant information and coverage related to the coronavirus pandemic and 401k plans.
This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.
If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.
Almost half (44 percent) of Canadians agreed the coronavirus pandemic has negatively impacted their ability to save for retirement and, as a result, 31 percent have changed their financial priorities, according to a new survey by Edward D. Jones & Co. The survey, which polled more than 1,500 adult Canadians, also found 33 percent of respondents said they're planning to contribute to their registered retirement savings plan, while 52 percent said they plan to forego their RRSP contribution and another 15 percent are undecided.
Source: Benefitscanada.com, February 2022
While year-end is ordinarily a busy time for companies, the number of COVID-19-related pieces of legislation and developments present additional items employers and plan sponsors must address in wrapping up 2021.
Source: Troutman.com, November 2021
On October 28, 2021, the IRS added two FAQs to its official guidance in the form of questions and answers regarding COVID-19 pandemic relief for retirement plans, including 401k plans.
Source: Compliancedashboard.net, November 2021
New research from Northwestern Mutual shows that Covid-19 has changed many Americans' retirement plans, with over one-third (35%) saying it has either moved up or pushed back their target retirement age. Almost a quarter (24%) plan to retire later than previously expected while 11% plan to retire earlier.
Source: Prnewswire.com, October 2021
Americans continued to save for retirement through DC plans during the first half of this year despite ongoing economic stresses brought about by the COVID-19 pandemic, according to ICI's "Defined Contribution Plan Participants' Activities, First Half 2021." The study tracks contributions, withdrawals, and other activity in 401k and other DC retirement plans, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans at the end of June 2021.
Source: Ici.org, September 2021
This DC Plan Participant Survey was conducted as the COVID-19 pandemic disrupted financial markets, workplace trends, and spending patterns. Against this backdrop, participants remained broadly resilient in maintaining their retirement savings efforts, but many also continued to appear overwhelmed and unsure about the various aspects of retirement planning.
Source: Jpmorgan.com, July 2021
Eighty-four percent of workers who have been automatically enrolled into their workplace retirement plan say they are glad that their savings have been jump-started. They say auto-enrollment has gotten them on the retirement savings path at an earlier age than if they had decided on their own. This is according to Principal's latest "Retirement Security Survey," which is based on a poll of more than 2,000 workers and retirees, and 230 plan sponsors.
Source: Planadviser.com, July 2021
Rollovers from defined contribution plans to IRAs increased by more than 12.6% in 2020, according to a recently released study. The Secure Retirement Institute estimates that rollovers from DC plans to IRAs totaled approximately $623 billion in 2020, up from the $565 billion transferred in 2019.
Source: Asppa.org, June 2021
Seventy-two percent of workers feel confident in their ability to retire comfortably, up 3% since March 2020, according to the 2021 Retirement Confidence Survey by the Employee Benefit Research Institute. Eighty percent of current retirees feel they have enough money to live on in retirement. While the pandemic has caused financial insecurity for many, employees have been able to keep up with their savings.
Source: Voya.com, May 2021
The COVID-19 pandemic has had significant implications for workplaces across the world. These implications extend into the realm of employee benefits, where employers and their workers must make difficult decisions regarding their retirement, health, and paid leave benefits. This International Foundation benchmarking survey captures a snapshot of current conditions.
Source: Ifebp.org, May 2021
The COVID pandemic is probably the most challenging thing we have gone through in our lifetime. While COVID has certainly been challenging, it has also opened eyes as to where the retirement plan industry is headed and the profound long-term effect that COVID will have on the retirement business (both good and bad).
Source: Jdsupra.com, May 2021
The IRS supplemented its online FAQs on COVID-19 relief for retirement plans and IRAs with information related to relief from partial plan terminations.
Source: Eforerisa.com, April 2021
The IRS released a five-part Q&A on the temporary partial plan termination rules for qualified retirement plans under the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Generally, there is a presumption that a partial plan termination has taken place when an employer's turnover rate is at least 20 percent during the plan year. Partial plan termination requires those participants covered under the portion of the plan that is terminated to be fully vested.
Source: Ascensus.com, April 2021
Nearly half of individuals who took a loan or withdrawal from their retirement plan during the COVID-19 pandemic agree or strongly agree they withdrew more than they needed. However, a significant amount (68%) of individuals agree or strongly agree they are now in a better place financially because they took a loan or withdrawal, according to new research from Voya Financial.
Source: 401kspecialistmag.com, April 2021
Despite a global pandemic that created uncertainty in the employment and financial markets, the 2021 Retirement Confidence Survey found eight-in-ten retirees are confident in their ability to live comfortably throughout retirement, similar to the 76 percent of retirees who were confident when the survey was last fielded in March 2020. Workers also remain optimistic, with 72 percent of workers expressing confidence in their ability to retire comfortably, up three percentage points from last year.
Source: Ebri.org, April 2021
More than 3.1 million Americans age 55 or older plan to apply for Social Security benefits earlier than they once thought because of the pandemic, according to the Census Bureau. That's offset by 1.4 million people in the same age group who anticipate working longer due to the impact of Covid-19, according to the bureau's latest Household Pulse survey conducted between March 3 and 15.
Source: Treasuryandrisk.com, April 2021
When markets tumbled, volatility reached unprecedented levels, and interest rates hit record lows in early 2020, it made sense that investors may have questioned what they should be doing with their portfolios. But what did their behavior look like later in the year after the initial shock of the year's unexpected turmoil wore off?
Source: Morningstar.com, April 2021
Among the numerous changes that have taken place last year, the CARES Act added a level of complexity to an already complicated retirement universe. The addition of Coronavirus-related distributions provides participants with the ability to repay qualified distributions anytime over the next three years, following the implementation of the CARES Act. To understand the repayment and reporting of CRDs, it is vital to first understand some of the details regarding these distributions.
Source: Asppa.org, March 2021
As a result of the pandemic, 41% of higher education institutions have already reduced or stopped their employer matching contribution, and 87% of them believe COVID-19 will have a significant impact on their employees' retirement readiness. Those are among the key findings of an inaugural survey of retirement plans in public and private higher education conducted by Greenwald Research on behalf of Voya Financial.
Source: 401kspecialistmag.com, March 2021
This John Hancock report looks at saving and investing behavior -- and progress toward retirement readiness -- over the course of an unprecedented year. Despite obstacles associated with the pandemic, participants held the line with their retirement savings.
Source: Johnhancock.com, March 2021
While it seems clear the pandemic has caused financial strain to many, a new study suggests there are signs of hope when it comes to retirement planning activity.
Source: Asppa.org, March 2021
While there is a lot of discussion about how COVID-19 has affected retirement security, a new paper suggests that things could have been a lot worse. COVID could have worsened the picture for 401k plans if financial markets had collapsed, the recession had led to widespread withdrawals, or more employers had suspended their match. But these things did not happen, according to the report by the Center for Retirement Research at Boston College.
Source: Asppa.org, March 2021
Callan surveyed plan sponsors and found that their priorities for their DC plans shifted considerably due to the pandemic. Sixty-nine percent of sponsors said they are now most interested in supporting their employees' immediate financial needs. In years past, employers' overriding priority has always been "aspirational goals for their total benefits or total rewards."
Source: Plansponsor.com, March 2021
In EBSA Disaster Relief Notice 2021-01, the DOL has issued a critical interpretation of prior guidance that extended certain deadlines for employee benefit plans, participants, and beneficiaries due to COVID-19. In coordination with other agencies, the DOL has interpreted the underlying one-year limitation on the ability of the agencies to extend deadlines through regulatory action to essentially apply on an individualized, rolling basis to each applicable deadline.
Source: Bradley.com, March 2021
The DOL has released Disaster Relief Notice 2021-01 that attempts to resolve a potential conflict with other statutory guidance under ERISA Section 518 and Code Section 7508A, which technically limits the allowable deadline extension period to a maximum of 1 year. Unfortunately, this Notice now results in new deadlines that can apply immediately and will differ based on individual events.
Source: Benefitslawadvisor.com, March 2021
COVID-19 Relief for Employee Benefit Plans, Participants, and Beneficiaries Continued for Limited Time
The DOL has released Disaster Relief Notice 2021-01 giving guidance on the duration of COVID-19-related relief previously provided. This article reviews the Notice.
Source: Ascensus.com, March 2021
Can participants combine the three-year spread for taxes and the ability to repay a Coronavirus-Related Distribution to do a Roth IRA conversion without taking a tax hit all at once?
Source: Dwc401k.com, February 2021
Because our world has changed so dramatically, Callan's annual Defined Contribution Survey has evolved to fit the rapidly shifting landscape facing DC plan sponsors. Their 14th annual survey covers the SECURE and CARES Acts, and the impacts of the COVID-19 pandemic, along with the key tenets of DC plan management, financial wellness, and health savings accounts.
Source: Callan.com, February 2021
While there has been a lot of discussion about how COVID-related economic shutdowns have affected retirement security, a new paper suggests that things could have been a lot worse. The shutdowns could have worsened the picture for 401k plans if financial markets had collapsed, the recession had led to widespread withdrawals, or more employers had suspended their match. But these things did not happen, according to the report by the Center for Retirement Research at Boston College.
Source: Napa-net.org, February 2021
As part of the push to enact a nearly $2 trillion stimulus bill, the House Ways & Means Committee moved forward February 11th with a proposal to freeze retirement plan contribution limits to help offset the cost of multiemployer plan relief. On a party-line vote of 25-18, the committee approved the Butch Lewis Emergency Pension Plan Relief Act of 2021.
Source: Asppa.org, February 2021
Last year, in response to the COVID-19 pandemic, the United States Congress and the Puerto Rico Department of Treasury granted favorable tax treatment to coronavirus-related distributions and participant loans from U.S. and Puerto Rico qualified plans. Recently, both jurisdictions extended similar tax treatment to certain distributions, hardship withdrawals, and plan loans related to non-COVID-19 disasters.
Source: Ogletree.com, February 2021
Data suggest that less than 1% of plan sponsors (with more than 100 participants) covering 1.6% of plan participants have suspended the match. A similar calculation for the Great Recession in 2008-2009 showed 5% of participants saw their employer’s match suspended. The conclusion seemed to be that companies were not affected by the pandemic, did not experience liquidity pressures, and saw no need to suspend the employer match.
Source: Marketwatch.com, January 2021
Large numbers of American households were forced to plunder their retirement accounts to make ends meet during the last year, even as the federal government plunged trillions of extra taxpayers' dollars into the economy to keep it afloat. And that grim news is going to add to the looming retirement crisis already faced by tens of millions.
Source: Marketwatch.com, January 2021
Often fiduciary duties are magnified and called into question when the country is plunged into an economic crisis and retirement plans suffer significant losses. Most notably, we saw an increase in the number of ERISA class action lawsuits in the wake of the Great Recession of 2008. This article analyzes the ERISA litigation trends that emerged after the Great Recession, the lessons learned, and what we may expect in the wake of the economic impacts resulting from the novel coronavirus pandemic, COVID-19.
Source: Dechert.com, January 2021
The COVID-19 relief bill may not get President Trump's signature after all, with implications for retirement plan sponsors.
Source: Napa-net.org, December 2020
One in five U.S. workers (21 percent) indicate their confidence in their ability to retire comfortably has declined in light of the coronavirus pandemic and only 27 percent are very confident that they will be able to fully retire with a comfortable lifestyle, according to a new survey released by nonprofit Transamerica Center for Retirement Studies.
Source: Transamericacenter.org, December 2020
There's some great news for plan sponsors in the COVID relief bill, a "temporary rule preventing partial plan termination." Once approved and signed into law, sponsors of defined contribution retirement plans can avoid the partial plan termination rules if the active participant count as of March 2021 is 80% of the active participant count at the time the national emergency was declared.
Source: Asppa.org, December 2020
At least 2 million U.S. workers have tapped into their 401ks and retirement plans for funds amid the nearly yearlong coronavirus pandemic, according to the largest financial planning administrators. Fidelity, Empower Retirement, Vanguard, Alight Solutions, and Principal, reported more than 2.1 million Americans have pulled funds from retirement planning accounts since the economy took a hit due to the pandemic in March.
Source: Thehill.com, December 2020
Thousands of companies have cut funding they typically pay to 401k investors, due to the coronavirus pandemic, according to a new survey. About 8% of employers slashed their 401k contributions in recent months, according to the Plan Sponsor Council of America, a group that represents companies with workplace retirement plans. Another 1% are considering doing so.
Source: Cnbc.com, December 2020
In contrast to the response during the 2008-09 financial crisis, more than 90 percent of employers will make their retirement plan contributions this year, though smaller organizations are more likely to have suspended or reduced plan contributions in the wake of the COVID-19 pandemic, according to this 7-page PSCA snapshot survey of retirement plan sponsors. Though most companies are not making changes to plan contributions this year, smaller organizations have been more impacted by current conditions and are thus more likely to have suspended or reduced plan contributions.
Source: Psca.org, December 2020
There have been numerous reports about companies suspending matching contributions, but how does that compare with the 2008-09 financial crisis? As it turns out, in contrast to the response during the 2008-09 financial crisis, more than 90% of employers will still make their retirement plan contributions this year, though smaller organizations are more likely to have suspended or reduced plan contributions in the wake of the COVID-19 pandemic.
Source: Napa-net.org, December 2020
Conducting 401k enrollment meetings is often a challenge for HR professionals, but the stakes have never been higher than they are in 2020. The coronavirus pandemic will impact both the substance and the form of these meetings. Here are eight tips to help you make your digital enrollment meetings as effective as possible.
Source: Recruiter.com, December 2020
As the COVID-19 pandemic arrived, Congress passed the CARES Act to quickly provide relief, including to allow cash from retirement plans to flow into the hands of individuals and families. This piece discusses the 2020 changes to retirement plan distributions and loans made by the CARES Act, as well as tips to take the most tax-efficient advantage of those changes.
Source: Thetaxadviser.com, December 2020
PSCA conducted a brief survey of 403b plan sponsors in October 2020 to determine how they are responding to the COVID-19 pandemic and economic conditions. This is the full 10-page report.
Source: Psca.org, December 2020
Americans overwhelmingly continued saving for retirement through DC plans during the first three quarters of 2020, undeterred by the economic downturn brought about by the COVID-19 pandemic, according to ICI. The study tracks contributions, withdrawals, and other activity in 401k and other DC retirement plans, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans at the end of September 2020. This study also tracks coronavirus-related distributions among plan participants to provide insight into financial activity related to the pandemic.
Source: Ici.org, November 2020
Do Defaults Limit Consumer Response to Rainy-Day Funds? Evidence from 401k Participants During the COVID-19 Pandemic
This research finds that self-directed workers in occupations with high subsequent unemployment were more likely to call the 401k plan TPA about withdrawing funds from their account than workers in delegated investment accounts. Workers defaulted into target-date funds and those who chose to delegate investments through a managed account were both less likely to contact the recordkeeper about making a post-CARES Act distribution.
Source: Ssrn.com, November 2020
On January 20, 2020, the first case of COVID-19 was diagnosed in the United States. As the virus continued to spread, many states issued stay-at-home orders, employers instituted work-from-home policies and the decade-plus bull market quickly reversed course. This not only impacted personal savings but also $6.3 trillion in retirement plan assets.
Source: Dimeoschneider.com, November 2020
A recent CIBC survey finds that the pandemic has impacted Canadians' savings and their anticipated lifestyle in retirement. Four out of 10 (40 percent) respondents worry about the effect of COVID-19 on their savings and retirement plans, with almost a quarter (23 percent) unable to contribute to their retirement nest egg since the pandemic began.
Source: Pensionpulse.blogspot.com, November 2020
COVID-19 has presented many challenges, including market volatility and business disruptions, which have placed added pressures on plan fiduciaries to comply with their ongoing obligations to prudently administer plans and plan investments. The steps outlined here will help employers and ERISA fiduciaries demonstrate prudence in plan operation and management and to mitigate their legal risk in response to the COVID-19 environment.
Source: Vanblacklaw.com, October 2020
The CARES Act provides several optional coronavirus-related relief provisions that employers may choose to incorporate into their 401k and other retirement plans. Those provisions include penalty-free benefit distributions of up to $100,000, a doubled maximum participant loan amount, and a one-year suspension of loan repayments for coronavirus-affected participants. Other relief provisions apply to participants who are not CAPs, such as the right to skip required minimum distributions for 2020. This article provides details on these relief provisions.
Source: Gct.law, October 2020
The coronavirus pandemic has caused upheavals in the markets, the workplace, and the home. What will be the effects on retirement savings? The coronavirus pandemic is exacerbating an already troubling societal retirement saving shortfall as workers look to long-term retirement savings to solve short-term financial problems.
Source: Troweprice.com, October 2020
Plan fiduciaries are now faced with the detailed compliance requirements of ERISA and cybersecurity laws including data breach matters. So, what can fiduciaries do to minimize their cybersecurity liability?
Source: Foley.com, October 2020
If you have a 401k, you may have considered tapping into it to get some relief from the current economic uncertainty. The CARES Act of March 2020 doubled the amount of money an employee could borrow from a 401k plan. Depending on your retirement funds' balance, a 401k loan could give you access to a large amount of money. But is it a good idea? Here's what you need to know.
Source: Foxbusiness.com, October 2020
The IRS issued Notice 2020-51, which gives guidance on the waiver of required minimum distributions for 2020 from certain retirement plans under the CARES Act and the required beginning date for RMDs under the SECURE Act. The Notice also provides two sample amendments that employers may use to give plan participants and beneficiaries whose RMDs are waived a choice of whether to receive the waived distribution.
Source: Hallbenefitslaw.com, October 2020
With mass layoffs commonplace during the COVID-19 pandemic, employers asked the IRS for advice on how to deal with the partial termination rule relating to employer contributions to their employees' 401k workplace retirement accounts. It's an obscure issue, but it's a big deal for the employees that it affects: It could mean thousands of dollars more credited to an employee's 401k account.
Source: Employeebenefitsblog.com, September 2020
Despite widespread anxiety in the first few months of the COVID-19 pandemic, most 401k plan sponsors and participants are staying the course, according to new data. Data from Principal shows that as of Aug. 31, only 3.2% of participants with a coronavirus-related distribution available have taken one for the period March-August 2020. The average amount taken for a coronavirus withdrawal is $16,500.
Source: Napa-net.org, September 2020
The expanded 401k loan provisions under the CARES Act have come and gone and few people have likely noticed. The increased loan-size provision was part of a package to provide financial relief to people who have been affected by COVID-19. But very few have taken out loans, especially in the expanded amount allowed by the CARES Act, according to several 401k recordkeepers that track the data.
Source: Investmentnews.com (registration may be required), September 2020
The coronavirus pandemic is exacerbating an already troubling societal retirement saving shortfall as workers look to long-term retirement savings to solve short-term financial problems. While the percentage of participants taking advantage of CARES Act provisions such as distributions and expanded loan options is low, doing so may undo years of retirement savings. Solutions like financial wellness can help shape future financial behaviors when balancing and reconciling short-term needs and long-term financial goals.
Source: Troweprice.com, September 2020
2020 is the year that ERISA 403b plan must issue summary plan descriptions to plan participants. Experts from Groom Law Group and Cammack Retirement Group answer questions concerning SPD distribution due to the COVID-19 pandemic.
Source: Planadviser.com, September 2020
The IRS issued Notice 2020-50 to update and clarify certain provisions of Section 2202 of the CARES Act, which deals with the tax treatment of coronavirus-related distributions from eligible retirement plans for qualified individuals. The Notice expands the definition of a "qualified individual" eligible to take coronavirus-related distributions from their retirement plans.
Source: Hallbenefitslaw.com, September 2020
The CARES Act allows greater access to defined contribution plan balances. In this 1-page report, EBRI considers the impact on the future retirement security of American workers.
Source: Ebri.org, September 2020
ERISA litigation tends to spike when economic uncertainty or turmoil rises. Although many things contribute to this historically verifiable trend, it is easiest for employers to think about just two of them. First, an employer-sponsored retirement plan, like a 401k or pension plan, is likely to suffer from market volatility. Second, employer-sponsored health and welfare plans will see upticks in claims issues during a health crisis. Here are some key considerations and preventive measures that every plan sponsor and fiduciary can monitor and implement to avoid a COVID-19-related spike in ERISA litigation.
Source: Constangy.com, September 2020
Section 2202 of the CARES Act, enacted on March 27, 2020, provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans. In these questions and answers, the IRS provides Coronavirus-related relief for retirement plans and IRAs.
Source: Principal.com, September 2020
B. Braun Medical is among the latest companies sued so far this year in an unusual wave of 401k litigation. That company, which was sued Aug. 26 in U.S. District Court in the Eastern District of Pennsylvania, is among more than 60 others facing new claims this year, according to an analysis by Bloomberg Law.
Source: Investmentnews.com (registration may be required), September 2020
Employees are mostly satisfied with their company's response to COVID-19, but there has been a change in sentiment concerning employee benefits, according to a series of surveys. The Hartford's Future of Benefits Study, which polled U.S. workers and human resources benefit decision-makers in early March 2020 just before the COVID-19 outbreak and again in mid-June, found that many employees continue to view their benefits positively, but their perceived value of the benefits provided and their trust in the company to make the best benefits decisions have declined.
Source: Ntsa-net.org, September 2020
Due to the COVID-19 pandemic, new guidance from the U.S. Department of Labor, the IRS, and the Department of the Treasury extends several deadlines for retirement plan notifications and benefit plan claims required by Title I of ERISA.
Source: Hallbenefitslaw.com, August 2020
The U.S. opened up retirement plans for participant withdrawals under the CARES Act, to act as a temporary solution for those without emergency savings. Almost a quarter of U.S. workers (22%) have borrowed money from their retirement accounts. That's what American Consumer Credit Counseling found in its new financial health index, which measured financial confidence among workers.
Source: Planadviser.com, August 2020
401k plan providers have improved service overall this year, but not when it comes to communicating about COVID-19, according to Cogent. Plan participants have a lot of questions about how to respond to the COVID-19 crisis, and they haven't necessarily gotten answers from retirement plan providers and advisers.
Source: Investmentnews.com (registration may be required), August 2020
A bit of good behavioral news from Empower Retirement. The recordkeeping giant's Empower Institute finds that Americans are determined to keep their hands off their retirement savings even when faced with financial difficulties brought on by the worldwide pandemic. A survey reports that 401k participants and those with similar workplace plans would rather cut back on spending or dip into their savings accounts before touching their retirement savings.
Source: 401kspecialistmag.com, August 2020
Unplanned retirement in the current crisis is higher than during the Great Recession, with women and people of color disproportionately affected, a report finds. Nearly 5 million people ages 55 to 70 have lost their jobs since March, and many of them are unlikely to return to the workforce, according to a report this week from The New School's Retirement Equity Lab.
Source: Investmentnews.com (registration may be required), August 2020
Employers know their employees are stressed and worried about their retirement planning in the wake of the Coronavirus pandemic. The good news is there are steps you can take to help your employees and your business at the same time. Here's how.
Source: Hubinternational.com, August 2020
The COVID-19 pandemic has brought about a staggering number of changes for employers in the past few months, requiring them to make significant changes to workplace processes and policies virtually on the fly. In this environment, it's important to review employee benefits plans to ensure these changes have not triggered any adverse consequences.
Source: Hallbenefitslaw.com, August 2020
While various shifts were seen in savings plan contributions and withdrawals in the first few months of the outbreak, there have been some improvements as of late, according to data from Ascensus. In the first few months of the COVID outbreak, the firm reported on a relatively small percentage of retirement plans that had stopped making contributions altogether due to business interruptions. But on a more positive note, as of the end of June, most of these plans have shown encouraging signs of recovery and are taking steps to return to pre-pandemic levels of savings plan contributions.
Source: Napa-net.org, August 2020
What is the cost of effectively using defined contribution plans as emergency savings vehicles in this way when it comes to the future retirement security of American workers? Using the Employee Benefit Research Institute’s Retirement Security Projection Model, EBRI simulates the impact on retirement balances as a multiple of pay at age 65 for scenarios where employees take full advantage of the CARES Act flexibility to access their defined contribution plan.
Source: Ebri.org, July 2020
As employers plan for open enrollment season careful consideration and planning should be given to how to communicate benefits holistically. If shelter in place orders and social distancing practices are still in effect during your enrollment window, it will also impact which communications channels are needed to reach employees.
Source: Voya.com, July 2020
Protecting Retirement Plan Participants and Your Company's Bottom Line When Employees Return to Work
Now that plan sponsors have had a few months to adjust to a "new normal," many are asking themselves, "Did we do enough to protect our business and plan participants from the pandemic"? With a new surge of infections predicted in the fall, plan sponsors want to know if there is more they can do with their benefit plan arrangements to protect themselves and plan participants from another economic downturn. This article provides an overview of the more common retirement plan issues facing plan sponsors along with suggestions for addressing these challenges.
Source: Icemiller.com, July 2020
Participants in 403b plans may not be able to take as much in distributions and loans as provided for in the CARES Act. Also, they may not enjoy the savings provided by the elimination of tax penalties for early distributions in the same way other plan participants will. Participants invested in annuity contracts may face charges for distributions and limits on amounts they can take as a distribution or loan that they may not be aware of.
Source: Plansponsor.com, July 2020
The CARES Act suspended required minimum distributions from certain retirement accounts for 2020. This waiver applies to any retirement account subject to RMDs, including 401ks, 403bs, 457bs, traditional IRAs, and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. Here are some of the rules you need to know regarding RMD waivers under the CARES Act.
Source: Hallbenefitslaw.com, July 2020
Participants in defined contribution retirement plans can skip their required minimum distribution payments for 2020. If RMDs for 2020 have already been received, participants have until August 31, 2020 to rollover the RMD into an eligible retirement plan. The IRS issued sample plan amendments that employers may adopt to give participants and beneficiaries a choice as to whether or not to receive their 2020 RMD, and FAQs covering details of the 2020 RMD waiver.
Source: Hansonbridgett.com, July 2020
Retirement plan fiduciaries are undoubtedly concerned about the effect of all the changes brought about by the pandemic and its effect on society and the stock market. Conducting a comprehensive review of a plan's investments, fees, and performance is in order to avoid litigation. Here are some considerations for fiduciaries navigating their duties in the wake of COVID-19.
Source: Hallbenefitslaw.com, July 2020
Pursuant to Notice 2020-50, CRD-qualified individuals who experience a loan offset may treat such amounts as CRDs, regardless of whether the plan offers CRDs. Deemed distributions of defaulted loans, in contrast, may not be treated as CRDs, and are not eligible for rollover.
Source: Retirementlc.com, July 2020
As we begin to think about picking up the pieces from the coronavirus pandemic and its related impact on how Americans save, we again will come face to face with the pre-existing problems facing retirement savings in our country. The two main savings obstacles for workers today are access and participation. This piece focuses on the access part of the equation because you can't effectively begin to improve participation if there is no access.
Source: Georgetown.edu, July 2020
The COVID-19 pandemic and its related economic downturn are negatively affecting retirement savings, retirement systems, plan sponsors, plan providers, and regulators. Policymakers are trying to respond rapidly to the crises related to COVID-19 and address the same issues, but their responses will depend on their specific circumstances. Nevertheless, countries can learn and benefit from each other.
Source: Georgetown.edu, July 2020
On June 19, 2020, the IRS issued Notice 2020-50, along with a related news release, that provides official guidance on coronavirus-related distributions and temporarily expanded loans taken from 401k plans due to the COVID-19 crisis. The Notice expands the eligibility criteria for such distributions and loans, thereby potentially increasing the number of 401k plan participants able to take advantage of these features.
Source: Compliancedashboard.net, July 2020
The CARES Act gives retirement savers added flexibility to access their 401k savings. And while this flexibility is helpful to many workers, it's encouraging that the vast majority have not needed to access their retirement savings and are staying the course on their journey to retirement. Less than 2% of participants had withdrawn assets via coronavirus-related distributions as of May 31, according to How America Saves 2020: The CARES Act. The decision to avoid tapping into retirement savings is consistent with other participant data.
Source: Vanguard.com, July 2020
Employee benefits law has changed significantly, even if temporarily, under the CARES Act. Employees may now take a coronavirus-related distribution from a defined contribution retirement plan. The IRS has yet to provide official reporting guidance, but it is anticipated that the reporting process for CRDs will be similar to those already in place for Qualified Disaster Distributions as outlined in IRS Publication 976, Disaster Relief.
Source: Hallbenefitslaw.com, July 2020
COVID-related distributions, loans, RMD relief, and special consideration for Balance Forward plans.
Source: Futureplan.com, July 2020
On March 27, 2020, the President signed the CARES Act to provide a broad economic stimulus and Coronavirus relief for Americans. Here are the provisions impacting retirement plans and IRAs, updated to reflect the recent guidance provided by the IRS in Notices 2020-50 and 2020-51. These provisions were effective immediately once the President signed the bill, but for the most part, employers have a choice on whether they implement these changes for their plans.
Source: Tri-ad.com, July 2020
Former participants in a 401k profit-sharing plan recently filed suit in Federal court in New Jersey seeking recovery of investment losses allocated to their accounts by the employer-sponsor. The losses were incurred when the employer imposed a special valuation date of April 30, 2020, to reflect the plan's investment losses incurred during the COVID-19 lockdown. This mid-year valuation reduced the account balances available for distribution to the former participants.
Source: Gct.law, July 2020
In the second quarter, NEPC conducted a flash poll on defined contribution plan sponsor views and reactions in light of COVID-19. The findings quell some of the largest fears about the potentially detrimental impact of the pandemic and economic disruption on retirement savings.
Source: Nepc.com, July 2020
This 6-page report provides a snapshot of initial policy responses related to participant access to DC plans in various global markets as of May 15, 2020. For context, while the coronavirus pandemic has affected 188 countries, the timing and intensity of the pandemic has varied significantly across the world. Country practices and retirement plan systems vary globally. As such, a country's policy decision may not only reflect their stance towards DC plan assets but also whether the country has a robust safety net or other significant sources of guaranteed income.
Source: Dciia.org, July 2020
The IRS released additional guidance to help employers cope with the financial strain of the COVID-19 pandemic. This time, in Notice 2020-52, the IRS has clarified, and in some cases temporarily relaxed, rules governing when an employer with a safe harbor 401k plan can stop making safe harbor contributions without disqualifying the plan.
Source: Clarkhill.com, July 2020
In light of the COVID-19 pandemic, the IRS has issued Notice 2020-52, offering safe harbor plan sponsors temporary relief from certain requirements applicable to midyear reductions or suspensions of safe harbor contributions. Notice 2020-52 also clarifies the requirements for midyear contribution reductions (during or after the pandemic) that affect only highly compensated employees participating in a safe harbor plan.
Source: Thomsonreuters.com, July 2020
Low- to moderate-income retirement plan participants have mostly turned to reducing their spending levels and using credit cards to find financial relief during the pandemic; however, more will be turning to their retirement plans for liquidity, according to research from the nonprofit Commonwealth and the Defined Contribution Institutional Investment Association Retirement Research Center.
Source: Planadviser.com, July 2020
The CARES Act permitted plan sponsors to make several discretionary amendments, giving participants greater access to their retirement savings, including the special coronavirus-related distributions, increased plan loan limits, and delayed plan loan repayments. The relief provided by these three discretionary amendments was only available for "qualified individuals." The IRS has recently amended the definition of a qualified individual through Notice 2020-50, expanding the relief to cover more individuals.
Source: Graydon.law, June 2020
More than a third (40%) of pre-retirees have a negative outlook on their life in retirement, the highest rates of negative retirement perception among survey respondents since 2014, according to the latest annual survey by Fidelity Investments Canada. The same percentage said their salary or earnings have decreased due to the coronavirus pandemic. Among those negatively impacted, 50% are reducing the amount of money they’re able to save and the amount they’re able to invest, compared to last year.
Source: Benefitscanada.com, June 2020
The IRS has significantly expanded the categories of "qualified individuals" who can receive distributions and loans with favorable tax treatment to include individuals who have suffered a pay cut and those whose spouses and household members have suffered an economic impact due to COVID-19. It also confirmed how to treat loans when qualified individuals have deferred payments during 2020 and explained how plans and individuals should report distributions for tax purposes.
Source: Dwt.com, June 2020
The IRS clarified several eligibility, administrative, and tax reporting rules in IRS Notice 2020-50. The Notice provides safe harbors, a model certification, and information reporting codes. It is a must-read for those responsible for administering employer-sponsored retirement plans.
Source: Benefitslawadvisor.com, June 2020
The retirement industry eagerly received the IRS guidance on applying provisions of the CARES Act with the issuance of Notice 2020-50 on June 19. It has provided important details on compliance with this legislation, which offers financial and tax relief to millions of Americans affected by the coronavirus pandemic.
Source: Ascensus.com, June 2020
The COVID-19 crisis poses a big challenge for employers to rationalize the benefits they offer to employees. With budgets stretched and every dollar scrutinized, tough choices loom on DC plan offerings, in addition to programs like financial wellness.
Source: Alliancebernstein.com, June 2020
IRS Expands Definition of Qualified Individuals for Purposes of CARES Act Plan Distributions and Loans
On June 19, 2020, the Internal Revenue Service released Notice 2020-50 to help retirement plan participants affected by COVID-19 take advantage of the CARES Act provisions providing enhanced access to plan distributions and plan loans. Among other provisions, Notice 2020-50 expands the categories of individuals eligible for CARES Act distributions and loan treatment.
Source: Clarkhill.com, June 2020
As the COVID-19 pandemic emerged in early 2020, the stock market declined by 35 percent between its February peak and March trough. While the market has largely recovered since then, it remains very volatile and exposes household savings to continued market risk. This 10-page paper documents where the declines occurred and the extent to which retirement accounts are exposed to equity market risk. The first section looks at overall trends in the stock market and household exposure. The second section breaks down the decline in equity values by source. And the third section focuses specifically on retirement assets.
Source: Bc.edu, June 2020
This IRS notice provides guidance relating to the application of section 2202 of the CARES Act for qualified individuals and eligible retirement plans. The guidance in this notice is intended to assist employers and plan administrators, trustees and custodians, and qualified individuals in applying section 2202 of the CARES Act, including guidance on how plans may report coronavirus-related distributions.
Source: Irs.gov, June 2020
The economic and societal lockdowns that have been imposed in an attempt to slow the spread of the coronavirus have presented unique challenges, including some that may not have been contemplated when the lockdowns were instituted. Congress was quick to pass the CARES Act, which gave retirement plan participants greater access to their plan balances through expanded loan and hardship distribution provisions. However, a stumbling block quickly became apparent when plan provisions required spousal consent for some distributions or loans.
Source: Strategicbenefitservices.com, June 2020
The CARES Act has many provisions that will affect both defined benefit plans and defined contribution plans. In this podcast, Milliman's Charles Clark and Ginny Boggs talk about the CARES Act and its implications for retirement plans.
Source: Retirementtownhall.com, June 2020
Plan Sponsors and those charged with the oversight of their 401k plan need to remain diligent in ensuring the safety of their participant's 401k accounts. Here are 11 items you need to make sure you're doing.
Source: Linkedin.com, June 2020
While the coronavirus pandemic has put the retirement security of all Americans at risk, there are actions they can take to put themselves in a better position, retirement plan experts say. Many people don’t know as much as they should about retirement and investments. There is no time like the present to learn.
Source: Planadviser.com, June 2020
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