Companies are suspending matching contributions in their 401(k) plans in the wake of financial hardship brought on by the coronavirus pandemic — and some firms are considering shuttering them entirely, according to news reports.
Hotel chain Marriott suspended 401(k) matching last week, after closing resorts and furloughing its employees, FA-IQ sister publication Ignites writes. Travel-booking firm Sabre had suspended matching contributions the previous week, according to Ignites.
Many more firms are considering doing the same, retirement plan lawyers tell the publication.
Meanwhile, the American Retirement Association has asked the U.S. Treasury to permit companies to suspend matching immediately, without giving the 30-days notice they’re currently required to, Ignites writes.
“The relief we are requesting is due to the immediate concerns relating to the Covid-19 virus,” the trade group wrote in a letter to the Treasury last week, according to the publication. “Many employers are under significant financial burdens and the proposed relief is needed to alleviate these burdens as soon as possible.”
The ARA also says that many firms, particularly smaller businesses, are considering shuttering their 401(k) plans entirely, according to Ignites. The pandemic may cause more than 193,000 companies to terminate their plans, according to an estimate by the National Association of Plan Advisors, which is part of the ARA, the publication writes.
By comparison, more than 200 firms terminated 401(k) matching in the wake of the 2008-2009 financial crisis, according to a study from Towers Watson (now Willis Towers Watson) cited by Ignites. About three-quarters of those plans were reinstated by late 2011, the publication writes.
Meanwhile, during the week ending March 21, more than 3.2 million people claimed unemployment benefits for the first time, according Ignites, which cites Department of Labor data released Thursday. That’s the most people since October 1982, during the U.S. recession, the publication writes.
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