A new survey of plan sponsors finds notable decision gaps between large and small employers in their adoption of the provisions of the CARES Act.
Considering the breadth and potential depth of those retirement plan options now on the table, it is perhaps not surprising that nearly half (47.4%) of the 152 plan sponsor respondents indicated they are still deciding which of the CARES Act provisions to implement, according to the survey by the Plan Sponsor Council of America (PSCA), part of the American Retirement Association.
Larger plans (plans with 5,000 or more participants) are more likely to have made a determination, with two-thirds already making a decision (66.0%), while fewer than half of smaller plans (plans with fewer than 200 participants) have (48.3%).
Overall, plan sponsors seem somewhat more open to adopting emergency distribution provisions than increasing loan limits, with nearly half (45.4%) already moving to do so, compared with just a third (32.2%) adopting the new loan provisions.
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The “snapshot” survey also found that:
- COVID-19 distribution: Nearly 70% of large organizations are allowing the distribution of up to 100% of the vested account or $100,000 versus only 20.7% of smaller organizations.
- Distribution repayment: Nearly half of respondents (46.7%) have embraced the option to allow repayment of coronavirus-related distributions during the next three years. This is also size-corelated, with 68.1% of large organizations allowing it versus only a third of smaller organizations.
- Loan limits: While a third of respondents overall are increasing the plan loan limits in COVID-19 qualified circumstances to $100,000 or 100% of vested account balances, this is true of only 17.2% of small organizations, versus nearly half (46.8%) of large organizations.
- Loan payments: More than 60% of large organizations are suspending loan payments due on or before Dec. 31, 2020 and deferring repayment for up to a year, versus only one-in-five (20.7%) of small organizations.
About one-in-ten (9.2%) aren’t planning to adopt any of these new options, though that is the case at only 2.1% of large organizations.
While the full impact of the COVID-19 pandemic is not yet known, most plan sponsor respondents—76.5%—are not currently contemplating changes to their current plan designs as a result, including more than 90% of small organizations. However, more than 20% of large organizations indicated they are suspending matching contributions, while only 3.6% of small plans have moved to do so. The report explains that during the financial crisis of 2008-2009, about 20% of companies suspended or reduced plan contributions, and most resumed them relatively quickly.
The full report is available at https://www.psca.org/research/cares_snapshot.
