PLANSPONSOR - April/May 2020 - 20

COVER STORY | THE ROAD AHEAD
and withdrawal options. He says most " nonessential business "
clients, temporarily closing in the early spring, opted to ease
participants' ability to take out money. Some of Kidder's " essential
business " clients, still open and not dealing with layoffs
at that point, were undecided about whether to implement the
provisions, he says.
Investment advisory firm RMB Capital Management LLC
spent time talking with client-plans' participants about the pros
and cons of withdrawing money from their account, and about
market volatility. " We're consulting with participants about all of
the options they have for loans and distributions. We don't want
participants to think this is an opportunity to just get access
to their money, " says James Rosselle, vice
president, director of retirement plan solutions,
at RMB in Chicago. " And if we can
encourage people to stay invested and ride
out the current market, I think that adds a
lot of value right now. "
Managing Director and Investment
Advisor Representative John K. Palladino of
401(k) & 403(b) Fiduciary Advisors Inc. in San
Mateo, California, talked with nervous participants
in early spring about the market's big
drop. " We obviously are looking at this from
a long-term perspective. We're telling [most]
participants, 'What phase are you in: The
accumulation phase. Because the market is
low right now, prices are low, and your dollars
are actually buying more shares of mutual
funds,' " he says. He and his colleagues also
talked with participants about the market's
bounce-back after outbreaks such as SARS in
2003 and the Ebola virus in 2014. " We tell them, 'What happened
three months after the SARS outbreak, and six months after the
Ebola outbreak? The market came back,' " he says.
To start regaining momentum in the months ahead, sponsors
can perform the following five steps:
1
Update Plan-Health Data. Baystate Financial creates planhealth
analysis reports for its clients' plans, Cunha says, and
he expects the COVID-19 upheaval to impact plan-health data
such as average account balance. " The market is down, and
participants now have more ability to access their accounts, " he
says. " The 401(k) plan has been turned into a credit union, and
the administrative people at these companies are turned into
bank tellers. They're going to be inundated with withdrawal
requests. " Cunha anticipates that the extent of the withdrawals
will be better known in June.
Gate City Advisors LLC in Greensboro, North Carolina,
annually puts together a retirement-readiness score for a client's
participant base, looking at the percentage of a plan's participants
on track to replace 80% or more of their income in retirement,
says partner Jonathon Schultheiss. " I think we're going
20 PLANSPONSOR.COM April - May 2020
to see the numbers change, " he says, referring to the market
volatility affecting balances, and the certainty that some workers
without an emergency fund are using their account to pay urgent
expenses. " I think this time period is going to expose how unprepared
people are in their personal finances. "
As the economy stabilizes in the months ahead, Cunha says,
" The devil is
Baystate Financial will work with its sponsor clients to update data
on participants' progress toward retirement readiness-and come
up with a plan for regaining momentum. " If a report like that has
been done in the past year, those plan-health numbers are out
the window, " he says. " Sponsors will have to reassess their plan
health. So we're going to do a study for each plan and assess what
damage has been done. "
Recordkeepers can help sponsors underalways
in the
data, so we
will share that
information
with sponsors,
to help them
understand
the impact. "
stand the upheaval's impact, too. " There's a
lot of interesting information available from
recordkeepers, not the least of which is the
behavior of their employees during this
time, " Murphy says. " How frequently did
they engage with their provider? What was
the propensity of participants to change their
investment allocation? Did they increase
their contribution rates, reduce it or stop their
contributions? The devil is always in the data,
so we will share that information with sponsors,
to help them understand the impact. "
2
Weigh a 2021 Match Reinstatement.
After many employers suspended their
match during the 2008 through 2010, reinstatement
typically did not come back by the
beginning of the next year, Murphy says. But
he attributes that to the Great Recession happening then and sees
a different situation this time. " We came into this downturn with
a very strong economy and a very tight labor market, " he says. " So
I think we'll see a faster move to match reinstatements. A lot of it
is that it's a very competitive labor market. "
Palladino anticipates working with employer clients in the
months ahead to evaluate a 2021 match return, as they gear up
operations and hiring. " It's easy for us to make the business case
for match reinstatement, because we're here in the San Francisco
Bay Area, " he says. " Before I worked in financial services, I used
to work in tech. And in tech, you've got to have a match, because it
looks good with your benefits package, to recruit and retain good
talent. " For employers that feel wary about getting locked into the
expense of a safe harbor or set dollar match, he says, he will talk
with them about implementing a discretionary match to give the
sponsor flexibility during the lean times.
Rosselle says more employers may decide, with their adviser,
to implement a stretch match when they reinstate the match.
" Most participant behavior is driven by the match: We often see
participants save only up to the employer match level, " he says.
" If you've been doing a 100% on 3% match, maybe now is the
http://www.PLANSPONSOR.COM
PLANSPONSOR - April/May 2020

Table of Contents for the Digital Edition of PLANSPONSOR - April/May 2020
