Half of firms have yet to restore 401(k) match, poll finds
NEW YORK -- Almost half of U.S. companies that reduced or suspended their contributions to employee retirement plans during the recession haven't restored them, according to Towers Watson.
A survey of 334 firms with more than 1,000 employees in April and May found that 18 percent reduced or suspended their contributions to 401(k) plans since September 2008 to save money. About 49 percent of them haven't resumed their matches, the New York-based benefits consultant said this week.
"Some of the companies who have reinstated or who are thinking about reinstating are making the contributions contingent on profits of the company," said Robyn Credico, defined-contribution practice leader in North America for Towers Watson. "If there is ever another downturn they don't have to go through the painful experience of communicating to employees that they're suspending the match."
Motorola, with 53,000 employees globally, will reinstate its contributions to employee plans starting July 1, said Tama McWhinney, a spokeswoman for the cellphone maker. Sears, with 290,000 U.S. workers, hasn't reinstated its match, according to spokeswoman Kimberly Freely.
The most common contribution by larger employers is 3 percent if workers save 6 percent of their salaries, Credico said. The average account balance of workers was $71,044, according to the survey, which represents more than 5.3 million plan participants.
Employer matches to workers' contributions help employees increase savings and provide an incentive for them to contribute, said Nancy Hwa, a spokeswoman for the Pension Rights Center.
About 57 percent of firms automatically enroll employees into their 401(k)s, and 72 percent use target-date funds as the default choice for those who don't select their own investments, according to Towers Watson.
Target-date funds gradually move money from riskier investments such as stocks to more conservative investments such as bonds as a worker reaches retirement. They attracted $45 billion last year, according to Morningstar, the Chicago-based fund researcher.
Lawmakers are seeking ways to prevent Americans from outliving their savings as more workers who relied on traditional pension plans are trying to pay for retirement with their 401(k) savings.
-- Bloomberg News