Let's face it: If you haven’t at least thought about reducing your company’s matching contribution, you probably are not doing your job (or you happen to be working at one of those few companies that is weathering the current downturn better than most).
It is—and should be—a tough decision, not only because it is such a strong influencer of participation rates, but also because it is a vital component in ensuring that your workers are able to save enough to have a financially viable retirement.
A recent analysis by Hewitt Associates claims that companies can save, on average, more than $1,500 per employee each year by suspending their 401(k) match (assuming the average employer match of 50 cents on the dollar up to 6% of pay). That means that an average mid-size company can save more than $10 million, and the average small company can save nearly $2 million annually.
Most surveys indicate that only a minority of employers actually have taken the step of reducing or temporarily reducing the match—and, of late, that decision has been linked to the preservation of jobs. Still, a recent nationwide survey of 2,280 U.S. adults conducted in late March by Harris Interactive found only three in 10 survey respondents (30%) think that those company matches will be reinstated, while 23% say they will not be reinstated and slightly less than half (47%) are not at all sure.
This month's KnowHow speaks to participants about what to do if their match is reduced. Whether you have—or will have—to make that decision, this month’s issue should help your participants better understand the impact, and gain insights on some positive and proactive ways to compensate for the difference(s). As always, we appreciate your comments.
—Nevin E. Adams, JD