The range of economic hardships due to COVID-19 extends even to our retirement planning. In a recent study, shows that 59% of respondents reported loss of income due to coronavirus, and 45% said the pandemic is making it difficult to pay their bills. The financial and emotional impact of the coronavirus may compound existing factors preventing Americans from saving more for retirement, like low income or mounting debt.
The pandemic has caused many to lose their jobs, preventing them from contributing to their plans. Some employers have also suspended their company matches. Those nearing retirement are concerned following massive hits to their account balances. Universally, this is a time of uncertainty and stress.
In these uncertain times, recordkeepers can help guide participants through their options via information hubs, press releases, leadership guidance and notifications on both sides of the login. Firms should ensure participants understand that retirement is a long-term investment and ultimately help participants stay on track toward their goals.
Over the past several months, all firms in Corporate Insight’s Retirement Plan Monitor coverage set posted notifications or banners on the public site, whereas about 70% posted notifications on the participant site. These notifications often took on an informative tone when discussing topics like the importance of investing long-term. Most notifications discussed market volatility. Others used an empathetic tone for topics like stress, anxiety and emotional investing. These alerts usually linked to related resources, like an information hub or blog post. Firms also began promoting digital usage as call volumes increased.
Information hubs are a particularly useful way to communicate to participants about a variety of topics in one central location. About 80% of firms introduced public information hubs that centralize access to blog posts, FAQs, educational content, self-service tools and other helpful resources. They also house press releases outlining relief efforts and CEO messages in either written or video form. Firms typically promote these hubs via homepage banners or notifications.
Since the federal government passed the CARES Act, firms have amped up their efforts to communicate participants’ options. If an employer chooses to adopt the CARES Act provisions, the act provides financial relief to participants affected by the virus. The act waives penalty fees on COVID-19 withdrawals, expands loan limits from $50,000 to $100,000 or 100% of the participant’s balance and suspends RMDs for the year. Yet, some employers are not adopting the CARES Act, meaning that participants who take distributions may face harsh tax penalties which could severely impact their future retirement lifestyles. Recordkeepers should post clear and consistent messages about the Act in universal and prominent locations. Firms should also integrate this messaging into loans and withdrawals interfaces to ensure participants know their options and consequences before making a decision.
Multiple firms have provided other relief efforts to support employees and plan sponsors during the pandemic. Principal, Transamerica, MassMutual, Empower Retirement, John Hancock, T. Rowe Price and Voya Financial are waiving fees for a variety of transactions including loans, hardship withdrawals and early distributions.
For more examples of how recordkeepers we track are responding to the COVID-19 pandemic, head to our dedicated client site section on the topic. Or, read our continuing coverage on our company blog.
