Client Service March 24, 2021

Advisers Giving Back: A Big Year (and Day) of Giving for the CCF

The CAPTRUST Community Foundation (CCF) raised almost $5 million in 2020, of which it donated a record $1 million, to the benefit of more than 200 nonprofits, over that difficult year.
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Art by Lars Leetaru


According to Tiffany Larew, an employee relations manager with CAPTRUST in Raleigh, North Carolina, the CAPTRUST Community Foundation (CCF) did not miss a beat when the coronavirus pandemic first hit the U.S. early last year. At the time, Larew was serving a term as president of the CCF, and she recalls how the firm’s leadership made the call to go fully remote on March 16.

She says the fact that the organization already had in place a strong infrastructure allowed it to get moving quickly to help address the challenges the pandemic raised. The CCF board, and the entire CAPTRUST staff, also had peace of mind knowing that the firm’s leadership had assured them the advisory business would be stable and that they should stay focused on serving clients and on giving back to the community.

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The strategy worked. The CCF raised almost $5 million in 2020, of which it donated a record $1 million, to benefit 211 nonprofits, over that difficult year.

As explained by Philip D’Unger, the CCF’s 2021 president and a senior team leader for wealth planning, the highlight of the year was the Giving Thanks campaign, which culminated in Giving Tuesday, on December 1. The campaign saw the CCF distribute $10,000 to each of 45 charities across the country.

“This $450,000 in contributions was made possible by CAPTRUST employees raising [that] $4.8 million,” D’Unger explains. “Each CAPTRUST office was given the opportunity to choose a nonprofit in their community to receive this $10,000, with the only requirement being that the organization help to provide food, shelter or other basic needs for families.”

For context, between its founding in 2007 and the end of 2019, the CCF had given roughly $1.6 million in total grants. Today, it has multiple millions left in the coffers that can be strategically invested and distributed in a meaningful way, D’Unger says.

Larew recalls how the first COVID-19-related campaign, undertaken early last spring, quickly generated about $150,000.

“That was a big accomplishment, but later in the year, when we saw no [immediate] end for the pandemic, the giving really accelerated,” she notes. “CAPTRUST founder Fielding Miller really pushed us to ask everyone to dig deeper, and in the end we raised an incredible amount of money. The best part was the happiness our employees felt about giving and just the fact that they were able to not even think twice about giving as much as they could.”

Asked to name a charity that a branch donated to and whose story stayed with her after the Giving Thanks campaign, Larew cites an organization in Akron, Ohio, called FullyEquipped. The 501(c)(3) nonprofit partners with underfunded local schools to equip kids for school, sports and life.

“They had a youth come in who was not expected or budgeted for,” she recalls. “He really likes to play basketball, but the organization was worried that it wouldn’t be able to provide shoes and other sporting goods for him—just the basic needs of food, clothing and shelter. However, the $10,000 grant allowed them to provide a new pair of basketball shoes for this boy, in addition to assisting others. It shows how $10,000 can make a big impact on an organization like that, to really brighten up a boy’s life.”

D’Unger says it is also important to recognize that his peers, and CAPTRUST itself, are very generous with their time—not just with their dollars.

“Everything we do from a foundation perspective is a partnership,” he says. “When you work with the CCF, the firm sends both people and money. We have a volunteer aspect to everything we do.”

Editor’s note:

Regularly on PLANADVISER.com, we present the profile of an adviser or advisory practice involved in philanthropic efforts. Besides to highlight the works that plan advisers do, and to attract a new generation, we hope these stories will inspire those still unsure about what role corporate responsibility or philanthropy should play in their firm.

Are you an adviser who gives back to the local, regional or global community? If so, we’d like to hear about it for our Advisers Giving Back program. If you have, or know of, such a story, please email editors@issmediasolutions.com.

Client Service February 19, 2021

Coronavirus Hardship Withdrawals, Taxes and Your Retirement Plan Clients

Coronavirus-related withdrawals made in 2020 were a financial lifeline for some, but they could also turn into a major tax headache for others.
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One of the most popular articles published last year by PLANADVISER Magazine—called “Warn Your Clients: Don’t Abuse Coronavirus Hardship Withdrawals”—went live in early June.

As readers likely recall, an important provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act established a window within which retirement plan participants negatively impacted by the pandemic could withdrawal up to $100,000 penalty-free from their tax-qualified accounts, with the options of either spreading the stated income over a three-year period for taxes or paying back the funds later to avoid taxation altogether. The June article noted how plan participants could simply self-certify that they had experienced a pandemic-related hardship that qualified them to take such a distribution—and how this could potentially generate fiduciary risk for plan sponsors and even the possibility of tax fraud being committed on the part of unwitting or dishonest participants.

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Robert Lawton, president of Lawton Retirement Plan Consultants, was among the experts cited in the article. Speaking again with PLANADIVSER this week, he did not seem surprised to learn about the success of the article, given how many questions and comments he continues to hear from his clients about coronavirus-related distributions, or “CRDs.”

PLANADVISER: You voiced some concern last year when the CRD framework was first set up that plan sponsors might have felt compelled to allow such distributions from their plans, even in cases where they felt their plan population was not suffering severe financial consequences that would justify taking money out of the retirement plan. Did this happen very often, in your experience?

Lawton: I was surprised at how this played out with my clients. Most of the plan sponsors that I work with from smaller companies chose not to adopt the more liberal rules on withdrawals, while all those from larger companies, with thousands of employees, did so.

In all cases, I had conversations with them about the potential benefits and negative consequences. No one really knew for sure what the future would be like immediately after the CARES Act was passed, so many clients chose to be safe and adopt the more liberal withdrawal provisions right away. Others, realizing that they could adopt CARES Act provisions at a future date if the situation warranted, chose to wait. 

As it turned out, there were many businesses and industries that were not impacted at all by what happened in 2020. In fact, some of my clients have reported that 2020 was their best year ever. Other businesses and industries got hit pretty hard, of course. Those businesses that were hard hit, where you may have thought withdrawals may be the highest, turned out to have very few. The main reason was that these companies ended up laying people off, making them eligible to take total distributions of their 401(k) accounts, rather than withdrawals. 

PLANADVISER: What do you make of the overall volume of withdrawal activity that we ended up seeing in 2020 and early 2021? In the end, the volume wasn’t as bad as some feared, but there has certainly been some damage done to retirement security, no?  

Lawton: My larger clients, all of whom implemented the more liberal withdrawal policies, were split in terms of volume. Some saw very little change in the amount of withdrawals taken, while others experienced an extraordinary amount of withdrawals—up to 10 times pre-COVID-19 levels.  

As it turned out, 2020 was a bad year to withdraw money from any investment. U.S. and overseas stock markets were up strongly during the year, which meant that those who withdrew funds early on missed out on a lot of earnings.

In my view, it is not likely that anyone will pay the amounts they withdrew back. That money has probably been spent. So those who have taken withdrawals suffered a double hit in 2020. They permanently withdrew some (or all) of their retirement balance and missed out on earning some very good returns on those balances. 

PLANADVISER: Have you seen any evidence that plan participants who took CRDs are putting serious thought into how this might impact their taxes in 2021 or subsequent years?

Lawton: No, none. I am afraid there will be quite a few people who have negative surprises when they complete their tax returns. For the average person, at first blush, the tax treatment of these withdrawals can seem very favorable. There is no 10% penalty tax and no 20% withholding requirement, and the tax liability can be spread over three years. And, again, there is the option pay back what you withdrew and get a refund of taxes paid.  

So, if participants had a conversation with a tax expert before they took a withdrawal, they could have received the impression that taxes weren’t anything to worry about. This may have implied, to many people, that they wouldn’t have to pay any taxes on these withdrawals, which is not true.

PLANADVISER: Have you seen any indication that plan sponsors and/or recordkeepers are creating the infrastructure that will allow people to pay CRD funds back into their qualified accounts, allowing them to avoid the income taxation?

Lawton: Nope. I don’t think anyone believes that most people will be paying these withdrawals back.

PLANADVISER: You mentioned last year that participants who attempt to avoid bankruptcy by taking COVID-19 withdrawals and end up declaring bankruptcy anyway did not have to lose their retirement money. Can you explain again what you meant, i.e., that funds held in qualified retirement plans are not subject to bankruptcy proceedings? Should this be a part of plan sponsors’ or advisers’ messaging to participants as the pandemic drags on?

Lawton: This is an important point for all retirement plan participants to keep in mind. If you have money in a qualified retirement plan—such as a 401(k) plan—and you feel you may end up declaring bankruptcy, please don’t take a withdrawal from your plan to pay off debts in an attempt to avoid bankruptcy.  

Bill collectors may be encouraging you to do this; however, your qualified retirement plan assets are not subject to attachment by creditors in a bankruptcy proceeding. In other words, your 401(k) balance cannot be taken away from you if you declare bankruptcy.

It would be great if all plan sponsors would discuss this point during their employee education sessions. I think it is also important that every employee who requests a hardship withdrawal receive an automatic referral to the company’s EAP, or employee assistance program, for financial counseling. Counseling should be completed prior to the withdrawal being approved and processed.

Many employees lose everything in a bankruptcy because they aren’t aware of the protections they are afforded. Getting them financial counseling as early as possible helps them not only get back on their feet quicker, but it can help preserve their self-esteem. Application for a hardship withdrawal is one of the early warning indicators of financial trouble.

PLANADVISER: What are your broad thoughts about how the industry has navigated the COVID-19 pandemic? Have sponsors and participants gotten the advice and guidance they need? Where have some of the pain points been, in your view, and what has gone well?

Lawton: I think the federal government responded admirably to the COVID-19 crisis by providing flexibility to employees with regard to their retirement plan balances in a very timely way. This is unusual in that the federal government can be a stumbling block.

I have observed plan sponsors responding appropriately for their corporate culture in taking advantage of the CARES Act provisions that work best in their environments. I haven’t seen employers struggling with the benefit implications of the COVID-19 crisis as much as the staffing and quarantining issues.

From my point of view, the federal government did an excellent job providing employers the flexibility they needed regarding retirement benefits in a time of crisis, and employers did a super job of using what worked best in their businesses.

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