Effective June 1, 2002, the aerospace and industrial products maker will no longer match dollar-for-dollar employee contributions of the first 6% contributed. Instead, the company match will now put in $0.50 cents for every $1 that employees contribute up to 6% of their salary, according to a news release.
Overall, the company estimates anywhere from one-half to three-quarters of its employees will be affected by the move, which is expected to save Goodrich an undisclosed sum, Paul Gifford, Vice President of Investor Relations for Goodrich, told PLANSPONSOR.com. Looking toward the future, no specific timeframe was provided when asked if the match will be reinstated to the full 100%, Gifford would only say, “we continuously review all of our benefit programs. A further review will be conduct of this program.”
The move comes as an overall cost-cutting move at the Charlotte, North Carolina-based company that is necessary due to the dire financial health of airlines, stemming from military conflict in Iraq and the outbreak of Severe Acute Respiratory Syndrome (SARS) in the Asia-Pacific region. Included in the other money saving measures were slashing 1,700 jobs and reducing its earnings and sales outlook for the year.
Present Company Included
Goodrich joins a growing number of companies that are halting matching contributions: Goodyear Tire & Rubber Co, Ford Motor Co(See Employers Strike the Match ), El Paso Corp, Textron Inc (See Textron Grounding Company’s 401(k) Match ) and CMS Energy Corp. Perhaps most notable is Charles Schwab & Co (See Schwab Suspends 401(k) Match ). Schwab, a staunch supporter of 401(k) plans as a way to save for retirement, announced a temporary suspension of its $2 for every $1 contributed company match in March.
However, a company match is still more the rule among successful DC plans, according to PLANSPONSOR’s annual listing of the Top 100 Defined Contribution Plans by participation rate (See Top 100 Defined Contribution Plans 2003 ). A company match was the most commonly offered plan feature, with 94% of the companies contributing to the retirement pot. Company stock is offered as an option for 32% of respondents.
Further testifying to the importance of a company match was a recent study conducting byNew York Life Investment Management. This study found among the eight plans that either suspended or reduced their match since January 1, 2002, the average impact on plan participation was a 9.45% decline (See Less Match, Less Participation? ). Participation reductions ran anywhere from a 1% reduction to as much as an 18.4% decline. Workforce make-up as well as level of communication may also have had an impact on some of these numbers. However, the longer the match has been cut, the greater the impact on participation.
One company may have seen the folly of its ways. General Motors announced in September 2002 that the company would increase the twice-slashed 401(k) for nearly 45,000 salaried employees (See GM Match Beefed Up Again ). The company did not say how much it would increase its match in the employee retirement savings program or when the change would take effect, but the move is welcome relief after GM twice cut its match since March 2001. First, the match fell from $0.80 to $0.60. And then in January, it went from $0.60 to $0.20 (See Company Match Hits the Skids at GM ).