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Plan Sponsor Guide for 401(k) Plans During the Pandemic

Published by Kim Moore on Mar 23, 2020 6:00:00 AM

So, we’re now all working from home, staying away from others, hoarding toilet paper, and in general trying to stay safe from the COVID-19 virus. I’m sure managing your company 401(k) plan is not at the top of your list of things to worry about. To help you through the crisis, here are some suggested items to pay attention to as we navigate through this difficult time:

  • If you are required to terminate a group of your workforce, remember that a 20% or higher reduction in force can lead to partial plan termination. Once that occurs, participant accounts become fully vested automatically at that time.  Notify your service provider if this occurs to ensure participants receive the full value of their accounts during this difficult time.pondering pandemic _board_text_11183 (1)

  • Hardship withdrawals and participant loans can be requested by participants if needed. Review your Plan Document and Summary Plan Description to identify the options available for your Plan.  Consider communication with impacted employees regarding this option.

  • During the stock market ups and downs, investment management is important. Ensure employees are provided information from your service provider regarding regular and timely market performance information.

  • If Company cash flow is a concern, review your Plan document for discretionary Employer contributions such as a match or profit share. You may want to discontinue those items to conserve cash.  If you are a Safe Harbor Plan, however, discontinuance of Safe Harbor contributions can cause problems for the Plan.  If you are considering discontinuing a non-discretionary or Safe Harbor contribution, we recommend you consult with your service provider regarding this action before you take it.

  • If your Plan has over 100 eligible participants, an audit of the Plan by a certified public accountant is required. The current Form 5500 deadline has not yet been extended (watch this blog space for potential future developments in this area).  Discuss the audit timing and work arrangements with your current auditor.  Consider moving the audit to a virtual firm to ensure the audit can be completed on time without face-to-face interaction.

As new developments occur that may impact your 401(k) Plan, Summit CPA Group will continue to communicate items of importance to Plan Sponsors in this hectic time.  If you have questions regarding your 401(k) Plan or need to find a virtual auditor, we are here to help.  Please contact Kim Moore, Director of Audit at Summit CPA Group directly at 260-918-8824 and we’d be happy to answer questions you may have.

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