Retirement: Employer matches on the decline
December 5, 2008 by Bill MeltzerPosted in: In this week's e-newsletter, Latest News & Views
With the economy officially in a recession, many U.S. employers are being forced to make a painful decision.
A recent Watson Wyatt study found that many companies are taking a hard look at the pros and cons of scaling back on matching employee 401(k) contributions.
So far, only 2% of companies have actually made the move to cut or eliminate matching contributions. But many more are considering it if the economy – and their own bottom line – continue to struggle as dramatically as in 2008.
The study finds that another 4% of companies currently plan to cut matching contributions in 2009. The percentage could reach double digits in the near future, barring a turnaround in the economy.
Even at companies with automatic enrollment, 401(k) participation is down. Cutting matching contributions can hurt morale, and perhaps cause further drops in participation.
On the flip side, many employees fear increased layoffs. Sacrificing the 401(k) match may be the lesser of two evils in the short term.
January 14th, 2009 at 12:21 pm
Cutbacks during times of economic troubles are prudent for all concerned. My employer needs to continue to make a profit to stay viable so as to have the need to retain employees such as myself. The question to be answered however is “Where do we cut?”. I trust that employers are taking a close look at their entire benefit packages, from 401(k) matching contributions, insurances, paid time off (PTO/Vac/Sic/Holidays, etc) to employee picnic’s, holiday parties, wellness programs, etc. Determining what benefit is most important to the employee base will go a long way in helping to make cutback decisions. Keep in mind that once something is gone…..it is very difficult to get it back. I personally would rather loose (even permanantly) the once a year holiday party and/or picnic, the discount gym membership and possibly a paid vacation day or two, than the contributions to my retirement savings account.