So Far, Easing 401(k) Access Prevails During COVID-19 Pandemic

Many employers are taking steps to make it easier for employees to access their 401(k) plans under the CARES Act, but some are considering more drastic action, according to new survey results. 

Nearly two-thirds of respondents (65%) in the latest pulse survey by Willis Towers Watson increased access to in-service distributions from participants’ 401(k) accounts while 16% either plan to or are considering doing so this year. 

Almost as many (64%) are now allowing participants to defer loan repayments, while 48% increased the maximum amount available for plan loans. Another 17% are planning to or are considering making either adjustment this year. 

A total of 816 employers representing 12 million workers participated in Willis Towers Watson’s COVID-19 Benefits Survey, which was conducted during the week of April 20, 2020. 

“These are difficult times emotionally and financially for many employees,” says Robyn Credico, North America Defined Contribution practice leader for Willis Towers Watson.

“Making cash available from defined contribution plans is an easy, relatively inexpensive way to provide much needed assistance to employees." Credico further observes that this comes at a time when some organizations are having to reduce their own spending on retirement benefits: “The more distressed companies cut contributions to their plans in an effort to reduce costs, similar to what we saw during the financial crisis of 2008.”

Willis Towers Watson reports that just 12% of employers suspended their matching contributions, but 23% are either planning to or considering doing so this year. The firm also found that significantly more companies in hard-hit industries—including retail and business services—made cost-cutting changes. One-quarter of these companies (26%) suspended their matching contributions, while nearly a third (32%) report that they either will or may do so this year.

Financial Wellbeing

The survey also revealed that companies are increasing their emphasis on financial wellbeing resources to help workers cope during the crisis. Recognizing that the economy may be hitting their employees hard, a third of respondents cited supporting their employees’ financial wellbeing as one of their top three benefit priorities for the next six months. 

As to the steps employers are taking, 63% said they promoted existing financial counseling resources, including 401(k) vendors and investment advisors for their employees, while another 20% will or may do so. 

Nearly half (49%) raised awareness of emergency cash sources, such as loan products, DC hardship withdrawals and loans, and HSAs, while another 29% will or may do so. Only 9% have introduced new financial counseling resources, but 26% say they plan to introduce or are considering new resources in 2020.

“The health and economic crisis caused by COVID-19 is prompting companies nationwide to step up their efforts to help employees reduce high levels of stress and anxiety,” notes Shane Bartling, senior director for Retirement at Willis Towers Watson. 

In fact, this finding is consistent with MetLife’s U.S. Employee Benefit Trends Study, which found that respondents who felt their employers are “doing enough” or going “above and beyond expectations” to support them during the pandemic feel more holistically well, along with more productive, engaged and appreciated, as compared to those who say their employers have not done anything.