Managing Turmoil: Practical Considerations for DC Plan Sponsors

Market volatility and fears of the coronavirus (COVID-19) have introduced novel concerns for many DC plans that have the potential to strain resources. Sponsors should consider what the impacts may be to the plan and how to mitigate them.

(Estimated reading time: 2 min 27 sec)

So far, the coronavirus pandemic has led to travel restrictions, self-isolation, and quarantines, and has triggered aspects of business continuity plans. In addition, recent market volatility driven by the spread of the virus and discord between OPEC and Russia have prompted increased participant inquiries and trading.

While recordkeepers have implemented business continuity plans for hurricanes and fires, those disasters have been localized. Plan sponsors should look to understand how business continuity will be managed from a national perspective:

  • Internet availability: High-traffic events have caused issues for participants trying to access information or make transactions. While plan sponsors have limited ability to improve this circumstance, from a vendor management perspective, it would be valuable to track participant statistics and document the review.
  • Call center staffing: Plan sponsors should seek to understand how recordkeepers will support call center operations in the event they need to quarantine staff or locations (e.g., work-from-home arrangements, increased staffing at other locations).
  • Paper check-cutting and statement production: Both critical functions require in-person interaction at the recordkeeper to manage the process. Plan sponsors may wish to communicate to participants that they may expect delays and that electronic options may streamline the process (e.g., an email campaign for ACH or electronic communications).
  • Payroll processing: The Department of Labor has historically viewed late payroll contributions negatively. In the event payroll contributions are held up due to limited resources to manage edits and reconciliation at either the plan sponsor or the recordkeeper, the timing to fund payroll may become an issue. Plan sponsors may wish to include extra time/resources for processing payroll during this time period.
  • Participant communications: Plan sponsors may wish to preemptively identify communication needs and opportunities for participants visiting the website, experiencing longer call volumes, or managing distribution and loan checks.
  • Onsite education or adviser sessions: In-person, face-to-face outreach may need to be canceled or postponed. While participants may want to meet with an adviser due to volatility, the method of delivery may be impacted by social distancing guidance.
  • Cybersecurity: Large groups of employees suddenly working from home raises novel cybersecurity issues. This may be a time to understand what stresses are placed upon vendors and consider hardening cybersecurity defenses.
  • Service-level guarantees: Recordkeepers may include service-level guarantees in their agreements. However, these contracts typically include a force majeure provision that limits their responsibility for “acts of god.” Plan sponsors should proactively monitor call center and online hits to understand how participants may be impacted by constrained resources.

Bottom Line: Don’t panic. Be thoughtful and wash your hands. From a fiduciary perspective, it is a good practice to check in from time to time with vendors to make sure they have contingency plans and open lines of communication when/if problems do arise.