The announcement by Schwab came as the company divulged trading activity among its clients rose last month and that the company is comfortable with analysts’ recent expectations for Schwab’s earnings this quarter. The match had been $2 for every dollar contributed by the employee up to $250, then dollar-for-dollar up to 5% of an employee’s salary and will be restored effective January 1, 2004, according to a Dow Jones report.
This comes after the San Francisco-based company’s March announcement that it was suspending the match in a cost saving move (See Schwab Suspends 401(k) Match ). That move gave Schwab an extra $12 million to $15 million per quarter. As of December 31, the 401(k) plan had $1.1 billion in assets and, as of March 31, 11,630 of the company’s eligible employees participated, for an 87% participation rate (See Game Plan: Suspension Bridge ).
At the time of the cut,Schwab’s chief financial officer, Christopher Dodds said the company found itself making tough choices about how to reduce expenses because customers were making 20% fewer revenue generating stock trades. The loss of the 401(k) match was part of an overall cost-reduction package that included travel and marketing budgets. In the end, the company decided to spare employees any more pink slips after already eliminating 9,000 jobs since the end of 2000, a workforce reduction of 35%.
However, plan sponsors and retirement plan watchers were worried that plan participants in other companies would feel the real impact. Many in the industry looked at Schwab as the champion for the defined contribution plan as a cornerstone to retirement planning, and the firm’s move as tipping the first domino in a long line of companies to follow suit in a effort to save on the corporate bottom line. In the end though, the list of companies dropping their 401(k) match was confined to a relatively small fraternity that included Goodrich (See Goodrich Flattens Company 401(k) Match ). 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.