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Plan Sponsors Ask…Q4 2020

October 1 2020

Q: Early in the pandemic, we were very concerned that employees would take as much money as they could out of our 401(k) plan. That didn’t happen. How have other companies (and their plans) fared? 

A: Your experience seems similar to what others have experienced. A survey conducted jointly by Commonwealth and the Defined Contribution Institutional Investment Association’s Retirement Research Center found that participants with low-to-moderate incomes did not withdraw significant amounts from their retirement plan accounts. Their research showed that just 5% had taken a withdrawal as of June, with 7% saying they planned to do so later. Instead of plan withdrawals, respondents said they had paused or stopped contributing to the plan (10%), stopped paying bills (8%), borrowed money from friends or family (7%), or sold possessions (7%). The survey’s published results ( make suggestions about ways employers and providers can help low-to-moderate income employees. For example, they suggest reminding employees about financial wellness resources, and offering highly liquid emergency savings accounts that can help with expenses during a crisis.

Q: We plan to add socially conscious investments to our 401(k) plan menu, and we’re wondering if there is anything special we should know about how to choose the right ones.

 A: In selecting any investment, socially conscious or otherwise, the key phrase is the same one you should apply to any decision for your plan: process documentation. Whether you’re selecting an investment, a provider, or anything else, it’s always smart to document how you arrive at your decisions, because it can be used as evidence that your process is sound — even if the results aren’t what you hoped they would be. Interestingly, there is some discussion recently about the DOL requesting lots of documentation from plan sponsors to justify their socially conscious investment choices (see Plan sponsors have been asked for as many as 13 types of support documents in the process, according to the cited article. We suggest that you talk to your plan’s investment professional about documenting your selection process. By carefully crafting an Investment Policy Statement, for example, you should be able to handle any inquiries that come about as you add socially conscious funds to your lineup.


Q: One of our workers wants to designate his children, rather than his wife, as beneficiaries of his 401(k) plan accounts. He is required to sign the documents in front of a live witness, but because of COVID-19, he is concerned about doing so. What can we do?

 A: The Internal Revenue Service recently issued a Notice, #2020-42, addressing this concern. The Notice provides temporary relief from the “in-person” requirement for witnessing a participant signature on this kind of document. It applies to participant elections made between January 1 and December 31, 2020. Under normal circumstances, the signature of the employee must be witnessed in person by a plan representative or a notary public. But temporarily, the requirement can be met, in the case of a notary, by using live audio-video technology. If the signature is to be witnessed by a plan representative, there are additional requirements, such as requiring that the participant present a valid photo ID during the live video conference. More conditions apply, so it is important to understand the temporary rules. The Notice can be found at You may wish to discuss it with the plan’s attorney, too, because if the signing does not meet the requirements, it could be invalid. That could cause trouble for the plan and its fiduciaries, not to mention significant complications of the payout upon the participant’s death.

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