Jeffsthelawyer.com
  • Home
  • About
  • Services
  • Blog
  • Contact
  • Info
  • PORTAL
  • Not in VA?

Sodoma Law PLLC Blog Page

You found it!  Leave some comments!

CARES Act...

9/2/2020

0 Comments

 
​EBRI Issue BriefCARES Act: Implications for Retirement Security of American Workers
Jul 30, 2020, 25 pages
SHARE



by Jack VanDerheiSummaryMany provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act were designed to provide relief to those American workers who do not have sufficient emergency savings to weather the current storm. These include increasing defined contribution plan loan limits to the greater of $100,000 or 100 percent of the vested account balance; suspending loan payments due on or before December 31, 2020, and deferring loan payments for up to one year; allowing distributions until December 31, 2020, of the lesser of 100 percent of the vested account balance or $100,000; and allowing repayment of coronavirus-related distributions (CRDs) over a three-year period.
The question, however, is as follows: What is the cost of effectively using defined contribution plans as emergency savings vehicles in this way when it comes to the future retirement security of American workers?
Using the Employee Benefit Research Institute’s (EBRI’s) Retirement Security Projection Model® (RSPM), we simulate the impact on retirement balances as a multiple of pay at age 65 for scenarios where employees take full advantage of the CARES Act flexibility to access their defined contribution plan. We generally find:
  • There are limited reductions in projected retirement balances as a multiple of pay at age 65 in scenarios where employees pay back CRDs within the prescribed three-year timeframe or take new loans — even when workers reduce future contributions dollar for dollar in order to repay those loans.
  • However, we see potentially significant reductions in retirement balances as a multiple of pay at age 65 when employees take full CRDs and fail to pay them back. This is especially true for older age cohorts. 
  • The most catastrophic scenario is one in which workers are provided CARES-Act-like access to withdrawals time and again as various crises occur. In other words, this is a scenario in which policymakers essentially turn defined contribution plans into de facto emergency savings vehicles. In this scenario, the overall median reduction in retirement balances as a multiple of pay at age 65 is 54 percent.
  • Still, further analysis is warranted. In our preliminary analysis of potential actual aggregate utilization of CARES Act provisions based on employer responses to a Plan Sponsor Council of America (PSCA) survey, we find that reductions were very small. Even in the scenario in which employees fail to pay back CRDs, the aggregate impact — because of low estimated actual implementation and utilization of CARES Act provisions — is estimated to be less than one-half a percent.
0 Comments



Leave a Reply.

    Author

    Jeff Sodoma, MPA, Esq. is a lawyer based in Virginia Beach, Virginia

    Blog! 

    Hello, there!  Welcome to my blog.  I will use this blog as a platform for my writing.  I will write about topics in the legal world, certainly, as well as everything else under the sun, because I have many interests (and viewpoints).  All views expressed in this blog, unless otherwise noted, are mine alone.  One of my interests is music--my wife believes that I should go on "Beat Shazam" because I know so many songs--and I will be, from time to time, analyzing song lyrics and how they relate to the legal world.  

    Archives

    July 2022
    February 2021
    January 2021
    December 2020
    October 2020
    September 2020
    August 2020
    June 2020
    May 2020
    April 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018

    Categories

    All
    Decisions
    Elder Law

    RSS Feed

Powered by Create your own unique website with customizable templates.
  • Home
  • About
  • Services
  • Blog
  • Contact
  • Info
  • PORTAL
  • Not in VA?