Most of the companies that either suspended or reduced their 401(k) matches during the economic downturn have reinstated them, Des Moines-based business consultant Towers Watson said in a study released Wednesday.
An analysis of 260 mid- to large-sized companies shows that 75 percent of those that took the step to cut costs have restored their match. Among those, about 74 percent are continuing the match at the previous level.
About 23 percent brought matches back at a lower rate. Just 3 percent restored matches at a higher rate; however, in all but one case the increase was associated with the company's freezing or ending its pension plan. The higher match was intended to make up for some of the lost pension plan benefits.
"With 401(k) plans now the primary retirement savings vehicle for most workers, it is very encouraging to see that the vast majority of employers have reinstated their matching contributions," said Robyn Credico, a senior retirement consultant at Towers Watson.
Most employers match 50 percent of employees' salary deferrals, up to 6 percent of pay. Matching contributions are a strong enticement to get workers to save for retirement.
Although the number of employers reducing their matches increased during the financial crisis, overall they represent a minority of 401(k) plan sponsors. Towers Watson said about 13 percent of companies suspended their match during the recent downturn.-- AP