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Retirement plans are supporting financial wellbeing amid COVID-19

By Mark Smrecek , Shane Bartling and Joe Palladino | May 29, 2020

These trying times are a good opportunity to highlight the benefits and support you offer employees and provide vital help addressing complex decisions.
Risque de pandémie

As the COVID-19 pandemic disrupts both employers and employees alike, financial wellbeing remains essential. Employers must continue to support employee financial wellbeing by engaging them with relevant benefits, making it clear how 401(k) balances fit into a broader picture with enhanced decision support especially since the CARES Act loosened access to funds.

Many employers have taken painful but necessary actions — furloughs, reduced hours and even layoffs — naturally creating workforce anxiety regarding financial stability. As a result, employer and government actions have brought U.S. retirement plans to the forefront. For example, some employers have temporarily reduced or suspended their defined contribution match.

Regardless of whether COVID-19 has required changes to your compensation and benefit plans, your employees will require additional financial information and support as market volatility and uncertainty are likely to continue for the foreseeable future. Here are ways to support employees’ financial wellbeing:

Maximize the value of benefits you still provide

While many plan sponsors are evaluating changes to retirement-program design to manage costs and increase value, one of the ways employers can provide enhanced support at a modest to no cost is to put their benefits on center stage. A hub or microsite focusing on the breadth of benefits already available to address short-term needs of employees and their families can go a long way. Many employees will be dealing with additional stress outside of work and seeking out support can fall to the bottom of a long list of priorities.

Keep communications easy to find and navigate, simple and genuine, and bring forward benefits that help reduce personal expenses, relate to access to funds and provide access to one-on-one support.

Offer in-the-moment decision support

Many employees may withdraw retirement savings as a source of funds to assist with immediate needs. While these funds may carry employees to the next payday, employees can make better decisions with more complete information. How can employers support employees’ need to balance today’s needs with security later?

Most large employers have taken advantage of the CARES Act defined contribution retirement plan provisions for COVID-19 impacted participants, either by increasing account balance loan maximums, permitting special tax-favored account withdrawals or both. In addition, employers can work with plan administrators to further increase access to plan loans and distributions by, for example, temporarily increasing the number of loans allowed and the money sources available for loans to include all vested accounts.

Alongside increased access, enhanced decision support can be a powerful way to demonstrate employer concern and facilitate better choices. An unbiased personalized financial coach can help employees navigate their unique financial situations. In addition to evaluating the decision to take a loan or a withdrawal, coaches can assist in identifying other sources of short-term funding (e.g., via claims to the health savings accounts, filing for a spouse’s unemployment, maximizing new government benefits, avoiding eviction and penalties, renegotiating debt or refinancing a mortgage).

Help employees see the full picture

Market volatility and employee concern go hand in hand. At a time like this, it’s also far from the only thing on their worry list.

The impact to 401(k) balances can be alarming, even for those with decades ahead of them in the workforce. For example, a large plan sponsor recently saw employees’ 401(k) account balances drop 15% to 25% during the first quarter of 2020. However, despite the drop, the age when those employees would be able to retire with the same standard of living only increased less than a half year on average with the impact most noticeable for employees in their 50s.

Clearly, account balances alone tell a narrow and more panic-provoking story. In truth, these balances combined with Social Security, Medicare, other benefits, and the savings from working extra months ultimately support long-term financial security. Furthermore, employees with defined benefit pensions can see particularly stable outcomes. Providing employees, a bigger-picture context beyond a simple 401(k) balance alone is vital.

The COVID-19 crisis has highlighted the importance of prioritizing financial wellbeing — in particular, financial resilience — in the short and long term for both employers and employees. For those living paycheck to paycheck, financial planning resources (budgeting, retirement savings, investment, estate planning) were number one on the list of the most desired employee perks in our 2019-2020 Global Benefits Attitude Survey. For the 800 employers who participated in our COVID-19 Benefits Survey covering U.S. benefits this April, supporting financial wellbeing is the third biggest benefits priority over the next six months, following communicating on relevant benefits and wellbeing programs and enhancing mental health services and stress/resilience management.

Regardless of how business is performing, employees nationwide are dealing with additional financial stress as a result of the COVID-19 crisis. More plan sponsors are planning to use analytics to understand workforce financial stress today and how the actions they take now may affect the long-term financial wellbeing of their employees. The focus is beginning to shift towards assessing options to provide business flexibility during the next phase while supporting the long-term wellbeing of their workforce, using data to guide the decisions.

This is a prime opportunity to showcase the benefits and support you offer employees and to provide invaluable help with navigating complex decisions with context and confidence in these trying times.


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