Two weeks after the enactment of the CARES Act, 20% of employers have cut their matching contributions to their employees’ retirement plan, according to a new survey released today by the Plan Sponsor Council of America (PSCA).
A plurality of employers, however, are still deciding what to do with the spate of retirement-related options the new law gives them regarding matching contributions, employee loans and distributions, the survey says.
“Employers are being forced to make difficult decisions between business needs and what is in the long-term best interest of their participants,” Hattie Greenan, PSCA’s research director, said in a press release. “They want to provide immediate relief to employees directly impacted by Covid-19, but are also thoughtfully considering the impact on their employees’ long-term financial stability and ability to retire.”
To date, more than 20% of large organizations said they are suspending matching contributions to their employee retirement plans, while only 3.6% of small plans have moved to do so.
Greenan noted that roughly 20% of companies suspended or reduced plan contributions during the financial crisis of 2008-2009, and most resumed them relatively quickly.
“While the current situation is very different, our current survey results suggest approximately the same numbers,” she said, adding that whether they hold largely depends on the length and ultimate severity of the current crisis, especially as it relates to small businesses.
Considering the breadth and potential depth of those retirement plan options the CARES Act put on the table for employers, it is perhaps not surprising that nearly half (47.4%) of the 152 plan sponsors surveyed said they are still deciding which of the new provisions to implement, according to the findings.
Overall, plan sponsors seem somewhat more open to adopting emergency distribution provisions than increasing loan limits, with nearly half (45.4%) already moving to do so, compared with just a third (32.2%) adopting the new loan provisions, the survey found
Among the survey’s other findings:
• Nearly 70% of large companies are allowing the distribution of up to 100% of an employee’s vested account or $100,000, as opposed to only 20.7% of smaller businesses.
• Nearly half of respondents (46.7%) have exercised the option to allow repayment of coronavirus-related distributions during the over a three-year period. Some 68.1% of large organizations allowed it versus only a third of smaller companies.
• While a third of employers overall are increasing the plan loan limits for Covid-19 qualified circumstances to $100,000 or 100% of vested account balances, this is true of only 17.2% of small organizations versus nearly half (46.8%) of large employers.