Empower Retirement and Voya have waived fees for retirement plan participants who take loans or hardship withdrawals from their 401(k) accounts in a bid to help savers amid the Covid-19 pandemic.
The recordkeepers’ polices follow the federal Cares Act signed into law by President Donald Trump last week. The $2.2 trillion stimulus package reduces tax penalties for those who take hardship withdrawals and doubles what retirement plan savers can borrow from their accounts.
Borrowers can now take the lesser of up to $100,000, or 100% of 401(k) or IRA account assets. Those under 59½ can take hardship distributions of up to $100,000 without incurring the standard 10% early-withdrawal penalty.
Until further notice, Empower — which administered $686.5 billion in assets for more than 9.4 million participants as of the end of last year — will waive origination fees on new loans and suspend all charges on hardship withdrawals from tax-qualified workplace plans, the company announced Thursday.
At any given time, between 18% and 20% of participants on the Empower platform have a loan against their retirement account balances. Hardship withdrawal rates are far lower, a company spokesman says.
And while the company has not seen any rise in either type of transaction since the Feb. 24 market turn, it anticipates such activity will pick up.
“The historic downturn in the financial markets and related economic uncertainty, coupled with elevated jobless claims reported by the Department of Labor on March 26, may foretell high levels of demand for loans and hardship withdrawals over the next several months,” the company says.
Around 3.3 million Americans claimed unemployment benefits in the week ending March 21, according to the DOL. Another 6.6 million Americans filed for unemployment benefits in the week ending March 28, shattering records, the Labor Department says.
Voya is likewise waiving hardship and loan fees. It’s “one way we can do our part to help alleviate their expenses,” Voya retirement and employee benefits CEO Charlie Nelson told FA-IQ sister publication Ignites.
Voya said Wednesday that it would waive the fees through September and estimates that it will save individuals between $10 million and $20 million, the publication writes.
The firm’s website says it serves as the recordkeeper to more than 47,000 workplace plans, representing over five million participants.
A spokesman for Fidelity says that the firm is working with plan sponsors on its recordkeeping platform to review whether they want to adjust plan policies or benefits in light of the CARES Act. Fidelity has never charged participants fees for taking hardship withdrawals, he adds.
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