In light of the economic recession and the news that big-name employers like GM, Sears, FedEx, Motorola and Starbucks have suspended 401(k) matching contributions, you may be tempted to keep the option as an open hole in your company's ever-tightening belt.
That, however, would be a mistake.
Why? For one, according to U.S. News, eliminating 401(k) matches may not even produce enough cost savings to impress shareholders/customers. Second, research cited in the same U.S. News article shows despite general investor inertia, companies that drop their match could see participation drop by 5 to 11 percentage points
Third, for employees who stay in the plan, "It's penalizing the folks who are doing the right thing (by) contributing to their retirement," Alec Dike, a senior financial counselor for Watson Wyatt, told USA Today. And fourth, move could scare off the very shareholders/customers you're seeking to calm, as Dike says, "it suggests you are in worse financial straits than you really are."
What are your thoughts? Is your company considering eliminating/already eliminated its 401(k) match? Why/why not? Comment below.
Thursday, January 8, 2009
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1 comment:
Great point! We are constantly reviewing data on the linkages between employer matching contributions and participation/ contribution levels, and the fact is that dropping the match is one of the least effective ways to cut costs.
Ryan Afred
www.brightscope.com
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