Some of our employees are dealing with financial challenges due to the coronavirus situation, and they are asking whether they can access their 401(k) accounts. Our plan allows for loans and for in-service distributions at age 59 ½, but some of these employees are younger than that. As a plan sponsor, I’ve always felt strongly that our 401(k) plan was a tool to save for retirement; however, these are unprecedented times, and I’d like to find ways to support my employees’ needs.
On Friday afternoon, March 27th, Congress passed, and the President signed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act - sweeping legislation intended to provide much-needed relief due to the coronavirus public health emergency. At nearly 1,000 pages in total, the legislation covers a lot of ground in a many areas. With respect to company-sponsored retirement plans, the relief focuses on four areas:
My company sponsors a 401(k) plan that provides for a discretionary matching contribution, which we deposit each pay period along with employee deferrals. Given the economic uncertainty, I’m focused on doing what I can to ensure adequate cash flow to maintain operations, including making payroll. That might mean we make the decision to suspend the matching contributions.
Given the current uncertainty in the world economy and the unknown ongoing affects of coronavirus, I’m looking at all financial obligations for our company, and for opportunities to reduce risk. We currently sponsor a 401(k) plan for our employees and provide a safe harbor contribution equal to 3% of employee compensation.
We are considering adopting a new cash balance plan. We really like the higher contribution amounts, but we keep hearing that the contributions are fairly rigid and inflexible.
In our last Correction of the Quarter, we looked at related companies setting up different types of plans for their respective employees and noted that this sort of structure isn’t “necessarily” a problem when it comes to 401(k) plans. Well, as usual, the devil’s in the details, so we thought it was worth diving into what happens when this is a problem.
We have a new TPA for our 401(k) plan and they’ve asked for our current plan document that was effective January 1, 2017. We know the document was signed back when it was prepared, but we can’t locate the signed copy.
My company sponsors a safe harbor 401(k) plan and every year my TPA sends me a reminder to distribute a notice to participants. It’s not the biggest hassle but I’ve wondered if it’s really necessary that this same information be provided to participants each and every year.
Larry and Kent are both participants in our company’s 401(k) plan. Both recently went back to school on a part-time basis to pursue graduate degrees and will continue working for us. Each of them took hardship distributions to help pay for tuition, Larry on September 18, 2019, and Kent on January 3, 2020. Both of them would like to resume making contributions to the plan as soon as possible.
The CEO (and 5% owner) of our company passed away earlier this year at the age of 73. He started taking his required minimum distributions right on time after reaching age 70 ½. At the time of his passing, he was not married and had no children. He also had not designated a beneficiary under the plan.
Get our 401(k) and defined benefits content delivered directly to your inbox.
As Featured In
