Unless you own or operate a financial services company, giving out financial advice is probably way outside the scope of your usual responsibilities. You might not know if Jim in HR can take a hardship withdrawal because his spouse has been furloughed, or why Sue in IT is suddenly able to borrow $100,000 from her 401k. However, your employees think because you are the boss/employer/person in charge you do have the answers (or at least know where to get them). Your employees need help, particularly those who have been impacted financially by the pandemic.

So, what can you do?

There are two important ways you can help your participants right now. The first is you can consider adopting the provisions under the CARES Act allowing for more generous terms on hardship distributions and plan loans. These provisions are specifically designed to provide relief to plan participants facing financial difficulty directly tied to the COVID-19 crisis. Plan loans and hardship withdrawals come with unique compliance requirements. Any changes to requirements due to COVID-19 legislation or regulation will need to be understood, implemented properly, and monitored.

Plan sponsors may wish to take the following actions:

  • Review your procedures for approving loans and hardship distributions to see if there are ways to streamline without sacrificing compliance.
  • Make sure there is a clear understanding between the sponsor, TPA, and the recordkeeper regarding the roles and responsibilities of each for these transactions. Document those procedures in writing to streamline operations and in the event of questions later.
  • Although it may be tempting to do so to help participants, sponsors should NOT approve loans or hardship withdrawals that do not conform to the plan terms and to the documented procedures outlined among the parties.
  • For plan loans, sponsors should understand their role, if any, in making sure plan loans are repaid timely.
  • Stay in regular contact with your plan advisor, third party administrator, and CPA. Legislation and clarification regarding plan distributions are still being worked out by Congress and you will need help to stay on top of any updates.

Please note that you DO NOT have to adopt these plan provisions. If your employees do not seem to be in financial need or if you are philosophically opposed to using retirement savings before actual retirement then you need not make the required amendments to your plan documents. However, be aware that some recordkeepers and plan administrators have adopted a blanket “opt-out” policy regarding these provisions. Unless notified before a certain date of a sponsor’s desire to opt-out, plan documents are being amended automatically in some cases to allow for these new provisions. Check with your service providers to determine if you need to opt-in or opt-out.

The second important way you can help your participants right now is by expanding your Financial Wellness offerings. Financial Wellness programs at a minimum encompass things like online calculators, planning tools, and articles embedded in your employee’s 401k website. However, Financial Wellness also can include developing a participant education policy, providing or improving access to investment professionals who can provide education and guidance to your employees relating to their retirement plan, group education meetings and on-demand webinars. The financial advisor to your plan is the most likely individual to work with when exploring your Financial Wellness options.

As we noted above, you aren’t the right person to be giving your plan participants advice or guidance. But you can make sure they do have someone and somewhere to go to for the answers and help they need. The more proactive you and your advisor are about participant education and guidance, the better their experience will be and hopefully, the result will be less anxious employees (and fewer issues landing on your desk!).

If you need someone to explain the CARES Act as it relates to your employer-sponsored retirement plan, PBMares is here to help. We are also able to talk about ways to improve your current Financial Wellness program and employee education policy.

Questions? Contact Kurt Johnson today.

About the Author:


Kurtis Johnson Wealth AdvisorKurtis Johnson, CFP®, CPFA®, BFA™

Wealth Advisor
As a Certified Financial Planner (CFP®) and a Certified Plan Fiduciary Advisor (CPFA®), Kurt provides advice and consulting services to plan sponsors regarding their retirement plans. In addition, he holds his Behavioral Financial Advisor (BFA™) designation and carries the VA Life and Health Insurance License.