DES MOINES, Iowa — Few areas are spared when it comes to corporate belt tightening. Employees have felt the impact of cutbacks in hiring, raises and even contributions to their 401(k) plans.
The first wave of reductions in 401(k) plans began in 2008. The number of employers lowering or suspending their contributions accelerated in the first half of 2009 as the stock market fell to its lowest point after the financial meltdown.
In new research released Wednesday, business consultant Towers Watson analyzed the action of 260 large to midsize companies. It shows 75 percent of those that took the step to cut costs in their retirement plans have resumed making 401(k) contributions. Among those:
• About 74 percent are continuing payments at the previous level.
• About 23 percent resumed making contributions to their employees’ accounts, but at a lower rate. Among these companies, the new contribution level was slightly more than half the original amount.
• Just 3 percent resumed making contributions at a higher rate.
“It’s encouraging that employers are reinstating the match and are still committed to helping people save for retirement,” said Robyn Credico, a senior retirement consultant at Towers Watson.
The median amount of time contributions were suspended was 12 months.
Some industries have bounced back faster than others. Companies in manufacturing and health care resumed making contributions at the highest rate.
With the exception of the publishing, financial and entertainment industries, the percentage of companies resuming payments exceeded 70 percent for all sectors.
The percentage of publishing companies reviving their 401(k) contributions was 62 percent; it was 53 percent in the financial sector. Companies in the entertainment industry trailed the pack, with just 50 percent resuming their payments.
Towers Watson believes recent economic turmoil and fears of a double-dip recession could result in more companies again suspending the match.
