Surveys of sponsors and record keepers show mixed results when it comes to offering CARES Act provisions.
More than half the 840 DC sponsors interviewed by the Secure Retirement Institute reported they hadn't offered either a CARES Act loan or distribution (38%) or were unsure at the time if they would (19%), according to a report published in July based on responses taken from mid-May to early June.
"I'm not surprised," said Deborah Dupont, associate managing director of SRI's institutional retirement research. "Sponsors are reeling."
The survey found that 8% of plans offered only withdrawals, 7% offered only loans and 28% offered both. The survey didn't ask why sponsors acted or didn't act.
The survey also found that 51% of respondents said they would benefit from guidance from record keepers on how the CARES Act would affect their plans.
Record keepers' cooperation is crucial to achieving sponsors' CARES Act goals, said Jana Steele, a Chicago-based senior vice president and defined contribution consultant for Callan LLC.
Communicating the rules of CARES Act policies — regarding loans and distributions — is "complicated," she said. "Sponsors and record keepers must communicate so participants understand."
Implementing the CARES Act terms is "heavily influenced by the record keeper," said Ms. Steele, referring to anecdotal comments from her DC clients.
In a survey of 63 corporate sponsors and 15 record keepers in mid-April, Callan found that one-third of record keepers had added the technical capabilities to accommodate coronavirus-related distributions by participants. The Callan survey showed that record keepers "drove the sponsors' decisions," Ms. Steele said.
Making changes in record-keeping platforms to incorporate CARES Act requirements "is an extremely heavy lift," especially in implementing the law's rules regarding loans, she said. "A lot of record keepers are playing catch-up."
The Callan survey showed that one-third of record keepers required sponsors to opt out of the CARES Act distribution service if they didn't want to participate while two-thirds required sponsors to opt in if they wanted the service.
When the Plan Sponsor Council of America looked at sponsors' CARES Act responses, it found that 36.5% of sponsors had implemented the raising of loan limits to qualified participants.
Also, 63.5% had implemented the liberalized law's distribution provisions and 54% allowed the distributions to be repaid within three years. Multiple responses were allowed in the survey of 137 sponsors.
At the time, 8.8% said they ouldn't offer CARES Act provisions,19.7% said they wouldn't offer the provisions immediately but might do so in the future and 2.2% said they were unsure.
Vanguard Group Inc., Malvern, Pa., has reported that 65% of its sponsor clients said they would participate in the CARES Act, according to responses as of May 31.
Of those sponsors, 99% told Vanguard they wanted to implement the CARES Act distribution policy. Among those 1,142 plans, 83% said they would offer distributions to all participants while 17% said they would offer distributions only to active participants.
