The impact of COVID-19 is disrupting all facts of life for individuals and businesses alike. Small business 401(k) plans have not been immune, but to what extent? LT Trust conducted a survey of all Plan Sponsors to gauge COVID’s impact on our clients. In total, LT Trust received 337 responses, segmented by number of employees and the 11 sectors of the S&P 500, to illustrate how the pandemic is affecting a variety of industries.

Continue reading to learn how the CARES Act is affecting America and the coronavirus stimulus packafge.

Payroll Protection Program (PPP) Loans

The Payroll Protection Program (PPP), created by the U.S. Congress, originally through the CARES Act, and replenished through additional legislation, has provided much needed relief to small businesses while working towards the goal of keeping as many employees as possible on payroll until business goes back to “normal”. Of the total plan sponsor respondents, 86% have applied for a PPP loan for their business. The two sector outliers were Financials and Utilities, which made up 30 of our responses, and only 57% of those businesses applied through the PPP loan application. There was not a discernible difference by the number of employees a business had.

Business Revenue

Overall commerce is currently at a fraction of its pre-COVID levels, and so the impact of revenue has been an ongoing discussion for small businesses. We asked our plan sponsors to rate on a scale of 1-5 how greatly COVID-19 has impacted their business’s revenue To no one’s surprise, only 5% of our responding plan sponsors stated “no impact” to their company’s revenue. On the flip side, over 40% of respondents indicated an “extreme impact” to revenue. An interesting note, however, is that our clients with more than 50 employees chose “extreme impact” 13% more than companies with 10 or fewer employees.

Current Business Climate Adjustments

Beginning in 2019, all LT Trust employees have had the option of participating in a work from home program once per week. That program was fortuitous as it prepared us for COVID and we have not missed a beat while providing low-cost 401(k) services to our devoted client base. This all began on Sunday March 15th, 2020, when all LT Trust employees received notification that, effectively immediately, all employees may work from home until further notice.

We asked our plan sponsors what kind of impact working from home has had on their business, and it appears that we are not the only ones who were able to successfully embrace working from home. As many as 57% of our respondents indicated either “small impact” or “no impact to operations”. Only 9% of our plan sponsors indicated an “extreme impact” of having employees working from home.

The Bad

As of May 28th, 2020, the effects of the COVID-19 pandemic have driven a staggering 40+ million Americans to file for unemployment benefits. That number is absolutely jaw-dropping without even taking its timeline of only two weeks into consideration. Unfortunately, our clients have not been spared. Almost 40% of our respondents have a “high concern” that they will have to lay off or furlough employees. In an ironic twist, well covered by the media, 59% of our healthcare clients express “high concern” that layoffs may occur.

The Silver Lining

I always say that the main goal for financial professionals working with 401(k) plans is to preach the idea of “save early and save often”. Even as the financial markets have declined during the pandemic, it is always important to keep contributing to a 401(k) plan, if possible, to meet your retirement goals. When it comes to continued contributions for both employees and employers alike, our plan sponsor survey shows promising indicators, even during the current economic environment.

There is no disputing that COVID-19 has affected everyone in a way that no living Americans has ever experienced —and hopefully never again. As we turn the corner into the summer of 2020, some are hopeful, while others...not so much. One thing is for certain: there are still a lot of questions that have not been completely answered. Uncertainty is certainly not a business owner’s friend, but keep in mind that Martin Luther King Jr., who faced unfathomable adversity, once said, “We must accept finite disappointment, but never lose infinite hope.”

Thank you to our plan sponsors who took a few minutes to provide us with this data to provide a more comprehensive view of how every business owner is confronting this crisis.