Many Firms Likely to Discontinue 401(k) Matches
October 29, 2008
General Motors recently announced it would stop matching employees’ 401(k) contributions. Sadly, that’s likely to become the norm at many companies, especially if the economic crisis deepens and lasts into next year or beyond, USA Today reports.
Two percent of the firms surveyed by Watson Wyatt said they have cut back or eliminated 401(k) matches, and another 4% said they are considering doing so, even though employers are well aware that doing so makes it harder to recruit good employees and motivate those already on the payroll. It also seems to send out a signal to the marketplace that the company is in financial straights.
Experts say the cutbacks are disheartening and could prompt plan participants to cut back on contributions of their own. “It’s penalizing the folks who are doing the right thing [by] contributing to their retirement,” said Alec Dike, a senior financial counselor for Watson Wyatt.
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