The spread of COVID-19, and the measures to keep it under control, have caused dramatic changes in the financial environment underpinning retirement plans. A March 19 Plan Sponsor Council of America webinar discussed what it means for plans and participants.
In “COVID-19 Market Impact Analysis: What Plan Sponsors Need to Know,” Vinitha Kaushik, Senior Investment Strategist at BlackRock Retirement Group, Michael Kozemchak, Managing Director of Institutional Investment Consulting, and Kurt Reiman, Managing Director of the BlackRock Investment Institute, offered their insights. The panel was moderated by Will Hansen, PSCA Executive Director and American Retirement Association Chief Government Affairs Officer.
Meeting Current Challenges
“The moves in the stock market have been so profound” that the common 60/40 allocation split is now 50/50, said Reiman. He said this was “the fastest we’ve seen this happen, even faster than the financial crisis.” This has many consequences and poses numerous challenges for plans, plan sponsors and plan participants.
“Its going to be months, and not just quarters and weeks,” said Kaushik, adding that it is “key not to overreact or make snap decisions.”
“It is a good time to speak to investors and portfolio managers,” Kaushik remarked. “Now is a really good time to speak to your managers. It’s in challenging times that you can really see how people are built for the long term,” she continued.
Kaushik had suggestions regarding meeting participants’ needs and concerns. “Now is a time to look at flexibility to allow participants to take periodic distributions,” she said, adding that in addressing questions from participants, “Use your partners.”
Communications
Kashik suggested making sure that communications from plan sponsors are the same as those from advisors. Further, she stressed the importance of remembering that members of different demographic groups need messages tailored to their particular needs, concerns and state in life. For instance:
- Communicate to young participants that this can be an opportunity to make investments at different prices.
- Communicate to participants who are approaching retirement that it’s important to stay confident with the plan. There is a risk of missing the economic rebound if retirement assets are drawn upon heavily.
- Communicate to retirees that during difficult times they should be disciplined in their distributions.
Despite different generations’ different communications needs, however, Kashik also said that “a lot of the message is the same—be disciplined and invested.
Kozemchak took a look at how communication takes place. He noted that there has been a 40%-50% uptick in mobile accessing of records. He further said that the hold times when participants call recordkeepers are between two and six minutes, and that many of those calls are answered remotely. And he reported that vendors’ proactive moves to meet participants’ concerns include putting information on landing pages and pushing the use of technology.
Meeting Immediate Needs
Recordkeepers are preparing for a natural disaster to be declared, said Kozemchak, and are preparing for hardship distributions and liquidity. He added that some plan sponsors are seeking guidance from providers concerning matching, and some also are considering altering participant contribution levels.
Reiman said that in the “really, really short term, there are some concerns about paper,” which he said is why the Fed has stepped in. “It’s important to state that all asset markets are having a hard time trading,” he said.
Kaushik suggested guarding against big, long-term loans, warning that “that isn’t money that comes back to the plan.”
She told Hansen that auto-rebalancing of investments should not be suspended, remarking that it is “as important now as in any time. It may even be important to check in sooner.”
The Bottom Line
“The importance of saving and staying in the plan still holds,” said Kaushik. And she struck a note of confidence: “We’re going to get through this.”
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