Making Informed Decisions Is Crucial

The sharp market sell-off in March 2020 raised serious concerns that DC plan participants might overreact and make decisions that would damage their retirement preparedness. However, recent research on participant behavior has provided some much-needed good news: The vast majority of 401(k) plan participants maintained their investment strategies during the market decline.[1] Plan sponsors should continue to educate employees on the value of maintaining a long-term approach to investing. Providing tools and resources to help plan participants make informed decisions is always important, and it is even more so in a challenging environment.

What You Should Know

  • Educational materials on the importance of staying invested, market timing, the cost of overreacting to short-term volatility, and downturns and recoveries are especially pertinent in this environment.
  • Service providers have online content that plan sponsors can make available to employees during times of high market volatility.
  • Financial wellbeing resources and access to financial counseling can help workers make good decisions, especially during the crisis.
  • CARES Act provisions for loans and withdrawals from retirement accounts should be thoroughly explained along with objective information on potential benefits and disadvantages.
  • Information that is targeted to the particular needs of specific groups of plan participants adds value to a sponsor’s communications effort. For example, older participants have questions and concerns that are unique to them, as do younger employees.
of DC plan participants made no change to the asset allocation of their account balances in
the first quarter of 2020.[1]
of DC plan participants took hardship withdrawals in the first quarter of 2020.[1]
of DC plan participants continued to make contributions in the first three months of 2020.[1]