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  2. DEFINED CONTRIBUTION
March 31, 2020 10:15 AM

Small DC plans risk termination amid coronavirus outbreak – ARA

Margarida Correia
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    Will Hansen
    Photo: Jennifer Bishop
    Will Hansen wants the Treasury Department to allow sponsors of safe harbor retirement plans to reduce or suspend employer contributions immediately without running afoul of current regulations.

    More than 200,000 small defined contribution retirement plans could be at risk of termination because of the coronavirus pandemic, Will Hansen, chief government affairs officer with the American Retirement Association and executive director of the Plan Sponsor Council of America, said Monday during a webinar.

    To minimize the risk, the ARA — on behalf of the PSCA, the American Society of Pension Professionals and Actuaries, the National Association of Plan Advisors, the National Tax-Deferred Savings Association and the American Society of Enrolled Actuaries — has asked the Department of Treasury for regulatory changes that would allow sponsors of safe harbor retirement plans to reduce or suspend employer contributions immediately without giving participants 30 days' notice as required under current rules.

    See more of P&I's coverage of the coronavirus

    If unable to reduce or stop employer contributions, many small businesses may have no alternative but to terminate their plans, given the cash flow issues many are facing, Mr. Hansen said.

    "We want to be able to get through this pandemic and ensure that companies are still operational and still operating their 401(k) plans," he said.

    Among other things, the ARA also asked the Treasury Department to relax a rule that triggers a partial plan termination if a sponsor lays off more than 20% of its workforce.

    "Because many companies are only temporarily furloughing or laying off individuals, we want to ensure that there is appropriate relief so that it's not seen as a partial plan termination," Mr. Hansen said.

    The ARA also plans to lobby Congress for similar relief. It plans, for example, to ask lawmakers to allow plan sponsors with fewer than 500 participants to waive any employer contributions that have not yet been made to satisfy their 2019 obligations.

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