Many employers are making adjustments to their 401(k) 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 (65%) increased access to in-service distributions from participants’ 401(k) 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,” said Robyn Credico, managing director, Retirement, Willis Towers Watson. “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.”
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 (26%) 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 (63%) said they promoted existing financial counseling resources, including 401(k) vendors and investment advisors for their employees; another 20% will or may do so. About half (49%) 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 (9%) has introduced new financial counseling resources, and about a quarter (26%) plan to introduce or are considering new resources in 2020.
“The health and economic crisis caused by COVID-19 is prompting companies nationwide to step up their efforts to help employees reduce high levels of stress and anxiety,” said Shane Bartling, senior director, Retirement, Willis Towers Watson. “By promoting their existing tools and resources to manage finances and providing options to get through a period of economic hardship, employers can not only demonstrate their concern for the financial wellbeing of their employees and families but also provide meaningful assistance.”