DES MOINES, Iowa — The stock market has rebounded, yet there is still more good news when it comes to 401(k)s. Most of the companies that suspended their matching contributions as the economy tanked have either restored the match or plan to within the next six months.
A company match is the amount an employer contributes to a worker’s retirement account. The most common employer match is 50 cents on the dollar up to 6 percent of a worker’s pay.
The move to restore matches is important because they are one of the most significant factors behind workers’ saving for retirement.
Matching contributions for large companies average about 11 percent of profits, according to the Profit Sharing/401k Council of America, a nonprofit industry group. That means corporate America spends millions a year on employee retirement fund matches. When times get tough and profitability falls, as happened in 2008, many companies begin to conserve cash and cut costs.
Nearly 15 percent of the 400 companies surveyed in October by the 401k Council suspended their matching program within the past three years. Among them: Black & Decker Corp. and General Motors Corp. However, more than 9 percent increased their contributions or started a company match in the past three years.
Of those that suspended their matches, 39 percent have already restored their contributions. Black & Decker, for example, restored its match last December. General Motors reinstated its match in October 2009. Another 38 percent plan to restore their match in the next six months, bringing the total to 77 percent.
The 401k Council study shows that when companies suspend the match, many workers stop contributing. About 78 percent of companies that continue to suspend their matching contributions reported a decrease in worker participation.
