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Retirement plan sponsors at large as well as small companies are fielding questions from employees about their retirement plans during the coronavirus pandemic. But frequently both HR and CEOs alike aren't sure what is the best way to reassure employees and advise them on riding the wave of a turbulent market.
Edward Gottfried, Director of Product, Betterment for Business
Who are employers turning to? They're contacting their retirement plan providers for advice. We connected with Edward Gottfried at 401(k) provider Betterment for Business about the inquiries they're seeing and tips on speaking to employees about their retirement plans. Gottfried manages product build and strategy and supports the broader product team at Betterment for Business.
BenefitsPRO: What are some typical inquiries employees are making to employers during this time?
Edward Gottfried: The most common employee questions we've been hearing include: What's going on with my 401(k)? What can, or should, I be doing right now?
Any sense of who is making inquiries? (near-retirees? millennials? self-directed investors?)
These questions are coming from all employees, regardless of their age or their level of direct involvement over their investments.
Is there a "worst thing" one should avoid saying? Or a "best thing"?
The best thing employers and HR departments can tell their employees is not to panic. They should remind them that their retirement accounts are long-term investments, and something that many of them won't be touching any time soon. The stock market has weathered huge ups and downs before, and while it may feel catastrophic right now, it's important to keep a long-term view and understand that the markets will eventually go back up.
What are some things employers can tell them?
We recommend that employers tell employees not to make any sudden changes or decisions. While employees may be tempted to take money out of their 401(k)s or the stock market, it's actually in their best interest to stay the course and understand that their funds will recover over time.
Further, they could face significant taxes by withdrawing from their 401(k) early. If they do feel the need to take action, we advise making only small changes to specific investments in order to lower their risk and make their portfolio more conservative.
For employees questioning whether they should still contribute to their 401(k), or if they should decrease their contributions: We fully recommend continuing to contribute, and maintaining the same contribution amount if possible. If you're not able to contribute at the same rate as before, we recommend lowering your contributions rather than cutting them off altogether.
Is there a better or "best" channel of communication to communicate with employees?
Employers should check with their 401(k) provider, who should be able to help them with information that they can provide to their employees. Betterment for Business is offering frequent webinars to both employers and employees, which can be a great way to provide a human touch to this uncertain time. We also suggest that employers send their employees information via email, providing guidance about what market uncertainty means and the importance of not taking drastic actions, as well as the steps that would be appropriate to take if they would like to take action.
How proactive should employers be?
This is a troubling time, both financially and personally, and many employees are worried and stressed. It's an important moment for employers to step up and proactively help offer comfort, support and resources to their staff.
How can plan providers/advisors/recordkeepers help? (if at all?)
Plan providers should be staying in frequent communication with employers and helping them to navigate this difficult time – whether that's by helping to answer questions, providing educational materials or offering additional resources for employees.
Edward Gottfried is the Director of Product at Betterment for Business, a 401(k) provider built with the needs of the modern employee in mind. In his role, he manages product build, strategy, and supports the broader product team. Prior to joining Betterment, he spent 7 years serving in several different roles at Bloomberg LP, including Product Management of Bloomberg's voice archive and trade archive platforms and Product Management of Bloomberg's people data suite.
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