FuturePlan Supports Small Businesses

Small businesses are the backbone of the American economy. With these businesses and their workers bearing the brunt of the hardship associated with the coronavirus (COVID-19) pandemic, it’s incumbent on the financial services industry to do whatever we can to support them. Many believe that this support will come mainly through federal relief, and that smart legislation—providing financial stimulus and other appropriate relief—will help right the ship.

But there are three ways that the financial services industry can help, as well.

1. Do all within our power to serve our clients faithfully. In this tumultuous time, our clients—along with their clients—need us more than ever. Although the vast majority of retirement industry teams are now working remotely, we must ensure that employers neither see nor feel any differences regarding the services we provide. That means continuing to fulfill our duties—such as processing payrolls accurately, responding promptly to employer and employee questions, and providing thoughtful plan design guidance—in spite of technological and social obstacles.
2. Speak with one voice to Congress and to regulatory officials, who can help employee benefits plans weather this economic storm. Even with major federal legislation recently being signed into law, we continue to advocate for individual and business relief. We can actively support further legislative and regulatory efforts to make plan operations easier for employers and more beneficial for workers. Some of the provisions we think make sense are:

• • Granting employers funding relief. Both defined contribution plans and defined benefit plans would benefit from delayed deadlines and reduced funding obligations.
  • Extending deadlines for reporting and corrections. The federal government should recognize that small businesses may find it especially difficult to meet deadlines for certain required annual reporting. Deadlines should be extended and penalties for late reports should be lessened, especially in light of recent increases under the SECURE Act.
  • Making hardship and coronavirus-related distributions easier for employers to process. If employers allow their participants to distribute their plan assets on account of hardship or coronavirus expenses, they should be able to expedite the payment—and then gather proof of the expenses later.
  • Advocating for financial relief for workers.
    • Relax loan repayments. Employees who struggle to repay plan loans during this crisis should be given some reprieve to avoid a downward financial spiral.
    • Remove the 10% early distribution penalty. This penalty should be eliminated for hardship distributions and for expenses related to the COVID-19 outbreak.
    • Waive 2020 required minimum distributions (RMDs). Without a waiver, individuals would have to take distributions based on valuations that occurred before the markets declined, resulting in disproportionately high RMDs. Individuals who have already taken 2020 RMDs should be allowed to roll over such distributions in the event that a 2020 RMD waiver is enacted.

Already, our efforts have helped several relief provisions—including the 2020 RMD waiver noted above and an extended plan amendment deadline—become part of a bill that was just enacted. The provisions listed above represent just a few of Ascensus’ advocacy efforts that are intended to assist those employers, employees, and service providers adversely affected by the COVID-19 outbreak.

3. Support the long-term success of workplace retirement plans. As we all know, many small business owners have overcome financial and administrative obstacles to offer retirement benefits to employees. Now—of all times—we should help these businesses maintain their plans through this financial downturn. The president has just signed into law a massive relief bill, which includes a number of beneficial retirement plan provisions. But this is just the start of a longer-term effort to guide our clients through the many questions and concerns they will have about implementing all the new rules. We still have a monumental responsibility to push for effective relief from the IRS and other federal agencies that will interpret the new statutes.
   
   Our industry shouldn’t lose sight of the importance of facilitating long-term retirement savings—by serving our constituents faithfully, by pushing for specific federal retirement plan relief, and by giving our clients tools to stay in their plans for the long run.
   
   Our country will eventually emerge from this situation stronger than ever. If historical patterns hold true, financial markets will also rebound. When that happens, businesses that have maintained their plans—and workers who have allowed their retirement savings to go untouched—will be in a position to see that their retirement goals are intact and on the road to recovery.
   
   This is why financial services firms must do their part to reinforce and sustain the employers and workers that have helped keep our economy vital for so long.

Legislative and regulatory information contained in this piece will be refreshed as events continue to unfold. Please check back regularly for updates.