The Corornavirus Disease 2019 (COVID-19) and the paralyzing fear it evokes have been rampant. As a result, the markets have dropped precipitously and remain volatile – and 401(k) investors are reacting as may be anticipated – running for the hills. Moreover, employees may have heightened concerns about access to appropriate care and treatment if they and their loved ones are impacted. As if employers didn’t have enough to consider in terms of supply chain, potential recession and employee leave (among other concerns), here are a few key points to consider from a benefit plan perspective.
401(k) Plan Thoughts
While the vast majority of 401(k) plans with which we assist are so-called “404(c) compliant” plans – intended to shift risk of losses based on investment decisions to the 401(k) investors, what is to be done by plan fiduciaries? While there is no “one size fits all” approach, here are a few strategies for consideration:
1. What does the Investment Policy Statement (IPS) state regarding review, watch list and fund removal? Consider, what, if anything, should be done now? Remember that adherence to the terms of the plan’s IPS is essential.
2. Are there any communications or investment education that are deemed warranted to plan investors – regarding “staying the course”, revisiting investment diversification, reinvestment limitations (e.g., waiting periods impacting reinvestment after a selloff?), etc.?
3. Are there particularly risky investment options made available (outside the “core” investments) that no longer warrant inclusion in the offerings? Knee jerk reactions are dangerous; consider, for example, the impact of eliminating a stock before it has a chance to rebound.
4. Does the plan offer default funds such as target date funds based on expected retirement dates?
Overall, while action at a plan level (as opposed to an investor level) may be unwarranted, taking action to review investment options offered in the plan (with experts, as appropriate) – and documenting that review – is of paramount importance from an ERISA fiduciary perspective.
Health Coverage Considerations
Open dialogue about coverage and treatment options with medical carriers is a starting point. For those plans with self-insured coverage, it may be important to vet what, if any changes, could be warranted and accommodated by carriers/TPAs to get employees access to a test and when available, a vaccine. For example, if a plan deems a treatment in clinical trial stage “experimental”, coverage generally would not be afforded. However, moving through various stages of clinical trials under the FDA’s protocol takes time, and employers may want to expand coverage for a coronavirus vaccine earlier in the process. While there are many factors to consider (e.g., risk of extending access to coverage before all typically mandated stages of review have been completed), starting the discussions now may be of value to respond to concerns if/when they arise.
Continued employee communication about good prevention practices as recommended by the CDC or other medical experts (including any carrier/TPA) and otherwise as deemed appropriate to curb unnecessary fears may be wise.