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Things to Consider as a Plan Sponsor During these Difficult Times

Published by Kim Moore on Jun 9, 2020 6:00:00 AM

As the Plan Sponsor of a 401(k) Plan, your main focus over the past few months has probably been on survival and working your company employees. Some employees may have been furloughed, laid off, or terminated. In some cases, employees are now returning to work. In other cases, business is booming, and you are scrambling to locate additional employees to meet the demand. What does all this mean to your company 401(k) Plan? We have put together some thoughts to help navigate the new “normal”.

  1. Ensure you communicate regularly with all employees including those that are furloughed or recently terminated. Explain the options available to them. The SECURE and CARES Acts opened up new options for hands_touch_device_custom_16412participants in 401(k) plans that may help employees that are financially struggling. Ask your service provider for communication/educational materials that you can provide to your employees to help explain the options. Although, many folks are living week to week, urge them to consider continuing their retirement savings accounts if possible. During uncertain times and periods of stress, more communication is better than less.

  2. Remember that returning workers or new workers should be offered participation in the 401(k) Plan based on your Plan document provisions. If you are getting ready to have employees return to work, discuss with your service provider the impacts to those that were participating in the Plan before the layoffs or furloughs. Also, newly hired employees need to be offered participation once they become eligible.

  3. We are all very busy during this difficult time. The workload for HR professionals has not diminished. However, the regulatory requirements for your Plan have not changed. Ensure that as staff change, duties are properly assigned or transitioned among the remaining staff. Ensure those with new responsibilities understand the requirements related to the Plan. Have someone review key compliance objectives to ensure they are being met.

    1. With all the transition of staff into and out of the company, access security is difficult to maintain. During this time of stress, however, fraudsters are attempting to use this state of constant change to their advantage.  Weak password management/enforcement can lead to disruptions and large losses for your company. Compromised data related to customers, vendors, or employees is embarrassing and can lead to lawsuits. Ensure you work with your IT Department to ensure your standards are strong and are being regularly monitored to ensure access to systems is modified as people exit the company and also return to work.

  4. As workers exit the company, provide information regarding the distribution options for their 401(k) account. Discuss with any participant wanting to take a loan the new options available with the CARES Act.

  5. Lastly, the markets have been very volatile throughout this period. Ensure your Investment Committee is reviewing Plan investments for any that are under-performing their peers. Look to replace investment options per your Investment Policy. Ensure you are documenting your review and the actions taken or decisions made in case of a lawsuit from participants. Also, providing educational materials to participants and ensuring they have good investment references (such as time available with Investment Advisors) can help allay their fears regarding their Plan account.

It is a difficult time for everyone and the Plan and/or participant account balances may not be at the top of your list of concerns presently. However, it is important to remember that for most employees, the Company 401(k) account is their primary retirement security beyond Social Security. Ensuring Plan security and health, along with compliance and providing useful communication is crucial during is time.

When it’s time for an audit for your plan it’s vital that you hire a trusted auditor. At Summit CPA we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine.  We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.

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