401(k) Matches Resume for 75% of Companies

By David Pitt, AP Personal Finance Writer

DES MOINES, Iowa (AP) — Few areas are spared when it comes to corporate belt tightening. During the economic downturn, employees felt the impact of cutbacks in hiring, raises, and even contributions to their 401(k) plans.

The first wave of reductions in 401(k) plans began in 2008. The number of employers lowering or suspending their contributions accelerated in the first half of 2009 as the stock market fell to its lowest point after the financial meltdown.

In new research released Wednesday, business consultant Towers Watson analyzed the action of 260 mid- to large-sized companies. It shows that 75% of those that took the step to cut costs in their retirement plans have resumed making 401(k) contributions. Among those:

• About 74% are continuing payments at the previous level;

• About 23% resumed making contributions to their employees' accounts, but at a lower rate. Among these companies, the new contribution level was slightly more than half of the original amount; and

• Just 3% resumed making contributions at a higher rate; however, in all but one case the increase was associated with the company freezing or ending its pension plan. The higher amount was intended to make up for some of the lost pension plan benefits.

"It's encouraging that employers are reinstating the match and are still committed to helping people save for retirement," said Robyn Credico, a senior retirement consultant at Towers Watson.

To be sure, companies also have an interest in encouraging workers to save enough. The stock market's impact on retirement savings has resulted in many workers being forced to stay on the job rather than retire. And that's not always in an employer's best interest, Credico said, because those workers often are there because they have to be, not because they want to be.