PLANSPONSOR - April/May 2020 - 2

INSIGHTS
Here and Now
I
It's hard for
any of us to
project, but
suffice it to
say I find
it unlikely
anyone
will feel
comfortable
calling this
" normal "
anytime
soon-new
or not.
will be honest: I'm a little tired of the phrase " new normal. " Especially as it is used to mean once
we get through this pandemic. As I have said before, I'm not one who particularly enjoys prognosticating
about the future. I get anxious trying to imagine how things will or won't work out.
And it's true that right now I find the future, this new normal people keep thinking of, difficult to
imagine. Because it's safe to say, I don't think anyone really knows.
Not only is it still trying to understand and get used to what it takes to keep people healthy
during the pandemic-the social distancing, the masks, the uncertainty as to whether having antibodies
protects you, etc.-but there's the financial cost. At this time, the U.S. is grappling with
more than 30 million Americans who have filed for unemployment over the past month. What
does a 20% unemployment rate mean for America? It's hard for any of us to project, but suffice it to
say I find it unlikely anyone will feel comfortable calling this " normal " anytime soon-new or not.
That being said, if you're like me, you enjoy focusing on the here and now and determining
what we can do to help our employees and their families as best we can. At PLANSPONSOR, we've
been focused on bringing you accurate information to aid you and your committees and company
as you make decisions. For example, after passage of the Coronavirus Aid, Relief and Economic
Security (CARES) Act, we wrote extensively about the types of help temporarily available to plans
in the form of new distribution and loan provisions. These provisions allow for eligible participants
to take a distribution of as much as $100,000, or take a new loan of up to $100,000, or both, if the
plan sponsor decides to allow for them.
As noted, these plan provisions are not mandatory, and each sponsor has to decide for its own
plan about whether to adopt said provisions. While plan sponsors should likely consider the needs
of their workforce in making this decision, they don't need to necessarily think about their fiduciary
responsibility here, as this is a settlor function.
When our research team surveyed plan sponsors in early April, we found many different
opinions about whether to implement these plan provisions. It asked them, which of the following
provisions of the coronavirus relief package do you expect your organization will offer participants?
Seventeen percent were unaware of any plans to offer the provisions, and 6% didn't know.
The most popular options were the coronavirus-related distributions (68%) and the extension
of loan repayment dates (56%). Less than half of plan sponsors (44%) intended to allow for the
increased loan limits.
Clearly some plan sponsors are concerned that allowing for these plan amendments will harm
participants in the long run. Are there arguments to be made that individuals shouldn't take from
their retirement plans? Of course there are, and we've written about them many times, providing
our plan sponsor readers with support about how to prevent participants from robbing Peter to pay
Paul, so to speak. However, in light of the current economic environment, I think it's safe to say
that most people who are taking funds from their retirement plan are not planning to use them to
buy a boat or big-screen TV or some other luxury-purchases we've cautioned against taking loans
for in the past. Considering that these provisions are available only to those impacted by COVID-19,
it seems difficult to understand why a plan sponsor wouldn't want to offer participants that flexibility.
As an adviser said to me last week when we were discussing this, and I paraphrase: " I'm not
going to worry that someone comes back years later to say, 'Plan sponsor, you shouldn't have helped
me pay my bills.' " He said he'd be more worried if a plan sponsor client doesn't implement such
provisions and instead sends participants to payday loans or high-interest credit cards.
Workers who need these funds are going to need them, and while retirement is what we want
people to strive to save for, we know that the state of financial wellness for many Americans means
financial security may be, right now, out of reach. They are focusing on the here and now, and, as
employers, it's the right thing to do to help them. -Alison Cooke Mintzer, Publisher
2 PLANSPONSOR.COM April - May 2020

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PLANSPONSOR - April/May 2020

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