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Surviving COVID-19: How Adjusting 401(k) Contributions Can Help Your Business

Surviving COVID-19: How Adjusting 401(k) Contributions Can Help Your Business Weather the Storm

If you have a small or midsize business and you’re assessing what it’s going to take to survive the effects of COVID-19, making changes to your 401(k) plan may help.

There’s precedent. During the financial crisis and recession that hit the U.S. a little more than a decade ago, 11 percent of employers surveyed reduced, considered reducing or eliminated matching contributions to employees’ 401(k) contributions. Now, difficult though the decision may be, cutting some or all the contributions in the form of an employer match may help keep some of or all your workers on the job — and it could help your business continue operating. 

Communication is crucial. If you decide to make such a change, know that employees may have strong feelings about it. They are already experiencing high levels of stress due to numerous changes in their day-to-day lives. Morale will likely be impacted. You can help ease the transition by what and how you communicate. Offer information as clearly as you can about the changes and why you’re taking this action, such as it being necessary for the company’s survival. And, as much as possible, provide them with a proposed timeline for how long the adjustment may last. People tend to deal better with disruptions and change if they know that it’s for a certain time frame and they won’t have to manage uncertainty and discomfort indefinitely.

Details matter. You may (or may not) need to amend your 401(k) plan document, depending on the type of plan you have and whether you make safe harbor contributions. Check with your financial or legal advisers about the requirements that might be necessary. As you’re working to keep your business afloat financially, you’ll also want to preserve its health from a statutory standpoint.

If you have questions, contact Mary Smith, SHRM-SCP at or call 678.205.5278, x125.

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