Firms Drop Matching Contributions in 401(k)s
By: Source: AARP Bulletin Today Date Posted: 2003-05-01 10:29:00-04:00
The burden of saving for retirement is falling harder on workers these days, as several companies have suspended matching contributions to their employees' 401(k) accounts.
Most companies that offer 401(k) plans match employees' contributions up to a certain percentage of pay. Benefits experts say such matches boost workers' retirement savings and their incentive to participate.
But now, in what Alicia H. Munnell, director of the Center for Retirement Research at Boston College, calls a "shocking precedent," a few large companies—including the Charles Schwab Corp., Ford Motor Co. and Goodyear Tire & Rubber Co.—have withdrawn the company match in an effort to cut costs.
With the economic slump in its fourth year, Munnell says, more companies may follow suit. The danger, she warns, "is that people are just not going to have enough savings when they get to retirement."
Of households with any kind of pension coverage, 58 percent have only 401(k)s or similar plans, the Federal Reserve Board says. That number would fall if 401(k)s were as strictly regulated as traditional plans, says Ed Ferrigno, vice president of the Chicago-based Profit Sharing /401(k) Council of America. One reason employers are willing to sponsor these plans, he says, is the ability to adjust them in lean times.
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