Sponsor: Corporate Cost Cutters Should Look at 401(k) Match Last

March 20, 2009 (PLANSPONSOR.com) - By the time M.A. Mortenson Co. is ready to suspend its 401(k) match, the company would have to be facing the biggest crisis of its life and out of other cost-cutting options, Annette Grabow vows.

That’s because, says Grabow, Manager of Retirement Benefits at the Minneapolis-based construction company, Mortenson believes it is worthwhile for an employer to protect the matching contribution unless it is no longer possible to do so. Mortenson was named a Plan Sponsor of the Year in 2008 (see Corporate Plan Sponsor of the Year: M.A. Mortenson Co.: Building a Better Future).

“(Company executives) feel very strongly we need to offer this benefit and it would have to be dire straits for us to take this step,” says Grabow. “I don’t think the company serves itself very well to drop the match…. It has never crossed our minds to do away with the match. It is just not the way we think.”

Now Grabow readily admits Mortenson’s financial picture is a bit different from that of some other employers because of the countercyclical nature of the company’s construction projects (such asthe Colorado Rockies’ Coors Field, the Walt Disney Concert Hall in Los Angeles, and the expansion of the main terminal at Washington Dulles International Airport).

Because a typical Mortenson job takes 24 to 36 months to complete, the company is still benefitting from its pre-recession business wins. It’s not only benefitting, Grabow says, 2008 was the most profitable ever since the family-owned firm opened its doors in April 1954.

That’s why Mortenson is about to distribute a profit-sharing contribution three times the size of last year’s (the company declined to reveal the specific amount) as part of the profit-sharing component in its profit-sharing/401(k) plan.

While Grabow readily admits Mortenson hasn’t yet had to face generating enough new revenue in a recessionary environment, that doesn’t mean it hasn’t given the issue loads of thought. “We’ve learned over the years that you have to look at the (business) backlog and plan ahead,” she says. “We plan ahead not just to make it but also our plan is to fund the match.”

Grabow is keenly aware that the match suspension trends are grounded in a sometimes-frantic effort to trim costs in the face of a slumping economy, but she is convinced that many employers will be able to wring out inefficiencies in other areas of their operation without having to resort to suspending or cutting their match. A recent PLANSPONSOR Webinar focused on potential cost-cutting areas sponsors can examine other than the match (see What to Consider Before Cutting the Match ).

"Look at this last," Grabow urged. "Look at other ways to save money. There are a lot of things you can cut back on.We've found ways to tighten down the hatches."

Ironically, if employers can leave the match in place, she says that will help support employee morale, which can, in turn, help engage workers in the corporate cost-cutting efforts.

"We are trying to engage our employees in trying to run a tight ship. It's taken all of us to work at that goal," she says. "I think it is important to keep employee morale up and have everyone thinking that their company cares about them and is keeping benefits up."

The bottom line is this, according to Grabow: participants can't afford anything that will make it more difficult for them to reach a comfortable retirement.

"What (employers) do here has such a profound effect on (employees') retirement goals," Grabow declares. "It will set them back even further and we need to keep that in mind."