“Hard times don’t create heroes. It is during the hard times when the ‘hero’ within us is revealed.” So said Bob Riley in an op-ed he penned for the Selma Times-Journal on September 24, 2004 in the aftermath of Hurricane Ivan.
What was true then is true today in the time of the coronavirus pandemic. It may not be on the front of their minds, but, when it’s all said and done, we may just discover which 401(k) plan sponsors are heroes (see “How Can a 401k Plan Sponsor Continue to Contribute to a Quarantined Employee’s 401k Account?” FiduciaryNews.com, March 24, 2020).
What does “heroism” mean?
It means stepping outside of your comfort zone. It means thinking in ways you’d never consider thinking. It means running towards what everyone else is running away from.
The biggest challenge, from a 401()k plan sponsor standpoint, is how to keep the money flowing to participant accounts. This is actually a smaller part of the larger (and more critical) challenge – how to keep the revenues flowing into the business when governments are telling businesses they need to shut down.
We’ll leave it to other articles to address how to do this. Not that it’s not important, but, so, too, is the continued funding of retirement accounts.
Plan sponsors must first look at their plan document. It will spell out the possibilities. If there aren’t guidelines in the document, maybe it’s time to study whether or not it makes sense to add them.
You wouldn’t need to add them if you’ve already figured out a way to keep your employees working (and, as a result, getting paid). And if you’re lucky enough to be in a business that continues to reap revenues during this mandated slowdown, then neither must you worry about obtaining the funds necessary to match those continuing employee contributions.
But what if you’re not so lucky?
That’s the time to think differently.
That’s the time to boldly go where no man has gone before.
That’s the time heroes will be revealed.
Available options really depend on the specific circumstances of the company. If the company has built up a large cash reserve, it may be possible to continue paying employees even if they’re sitting at home doing nothing. It’s a risky step from a financial standpoint, but it’ll generate a vast amount of good will. That may translate into a spike in revenues if marketed correctly when the spending begins anew.
Companies less flush in cash, but still with some, may want to readjust their matching formula, even only on a temporary basis, to allow employees to “catch-up” on any missed matching contributions once they return to work.
Finally, and this is a variation on the theme above, if the company doesn’t presently have the reserves to make such a promise, wait and see what happens at the end of the year. We may suffer from an immediate economic slowdown as a result of the coronavirus quarantine, but this isn’t like past slowdowns. Remember, a little more than a month ago the markets were at all-time highs and the economy was humming alone.
This has some analysts believing the recovery will be a just as sharp as the drop. If that’s the case, empty cash coffers today may be overflowing by the end of the year. A one-time profit-sharing contribution can more than compensate employees for any lost contributions.
These are only three ideas from a lowly columnist. I imagine those on the front line will have even more.
Which 401(k) plan sponsors will be revealed to be heroes?