401(k) Plan Management during COVID-19: FAQs

As employers around the country are thinking about their responsibilities and options in the uncertain weeks and months ahead, we’re hearing questions about what it takes to keep existing 401(k) plans in good working order. Here are some of the most frequently asked questions, along with answers that can help you take stock of your retirement plan during the coronavirus crisis.

Can I suspend or adjust my employer contributions?

Elective employer contributions can be suspended at any time, but specific contribution amounts or formulas that are written into your plan document, like Safe Harbor contributions, take more time and planning to adjust.

How do I amend my Safe Harbor contributions?

The CARES Act does not specifically provide any adjustments to how Safe Harbor contributions are handled, which means the standard rules for a mid-year change to a Safe Harbor plan still apply:

  1. To change a Safe Harbor match, one of the two following criteria need to be met:
    1. The employer is operating at an economic loss for the plan year;
    2. Or the employer has provided a notice to all plan participants before the start of the current plan year disclosing that there is a possibility that employer contributions may be reduced or suspended mid-year
  2. Additionally, employees need to receive a supplemental Safe Harbor notice that explains what the changes will be, when they will take effect, and the timeline for employees to amend their deferral elections
  3. Any change in Safe Harbor contributions can’t take effect until at least 30 days after employees are given this supplemental notice
  4. The plan needs to use the current-year testing method (or needs to be amended to do so)
  5. Nondiscrimination tests need to be performed for the entire plan year, as well as top-heavy testing because the Safe Harbor provision is being removed
  6. Finally, the plan needs to continue satisfying all other safe harbor requirements until the amendment takes effect

Will the IRS deadlines for completing employer contributions be extended?

The CARES Act has extended the deadline for filing individual federal income tax returns to July 15, 2020. This deadline determines when employers need to make their contributions by each year. Accordingly, employers now have until that date to complete their contributions into their 401(k) plan. 

Has the deadline for form 5500 filing been extended?

There has not yet been any adjustment to the filing deadlines for form 5500. Outside of the shifted deadline for completing employer contributions, check out our compliance calendar for a clear look at the key deadlines your plan will need to keep up with throughout this crisis.

How can plan notices be delivered while employees are working remotely or furloughed?

Your 401(k) service providers may already provide plan notices electronically or via mail, and they can continue to do so during the current pandemic. Also keep in mind that employee requests for notices like summary plan descriptions need to be provided within 30 days of the initial request. Talk to your 401(k) adviser to get a better understanding of how they plan to share these notices while following electronic disclosure rules.

Should I update my 401(k) plan’s investment options in light of the economic downturn?

Saving for retirement is a long game, and fluctuations in the stock market are to be expected over the course of any employee’s career. This is why we generally advise anyone with a 401(k) account not to miss out on growth opportunities in an eventual upswing by trying to protect their 401(k) investments against market volatility. Likewise, as a 401(k) adviser, we focus on the long-term ability of the overall fund lineup to provide our clients’ participants with the right options over the course of 10, 20, or even 30 years for a dignified retirement. For more information, read our blog on 401(k) investments and stock market volatility.

What provisions does the CARES Act make for retirement plan participants?

The CARES Act provides broad relief for retirement plan participants in terms of looser distribution rules and delayed 401(k) loan repayments. To learn more, read our FAQs on the CARES Act and 401(k) loans and distributions.

Should I terminate my 401(k) plan?

If you believe your business will remain open through this crisis, terminating your 401(k) plan might be a rash decision. The IRS enforces a “successor plan rule,” which keeps employers from starting a new 401(k) plan within one year of terminating a previous plan. While it’s prudent for employers sponsoring a retirement plan to consider every option for the good of their company and employees, including terminating a 401(k) plan, remember how important a 401(k) plan is for helping your employees retire and helping your business attract future employees.

There is no pause button for retirement plans. As you continue managing your plan through unprecedented times, know that Fisher Investments 401(k) Solutions is standing by to answer your questions, as well as those of your employees, to help you better understand the impact of COVID-19 on your business and finances. Contact us today to learn more about how we can help you provide a valuable retirement benefit with reliable service, or click on a link below for more immediate answers to coronavirus-related 401(k) FAQs. 

Continued Reading on the CARES Act’s impact on 401(k) plans:

Layoffs vs. Furloughs: What's the difference in terms of 401(k) impact?

CARES Act and RMDs: FAQs

CARES Act and 401(k) Loans and Distributions FAQs




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