Beware Incredible Shrinking 401(k) Match, Consultant Warns

Nearly 200 corporations have already stopped matching workers’ contributions to their 401(k) plans and the number could very well accelerate—and possibly double—in the coming months.

That’s the prediction of Pam Hess, head of retirement research at consulting firm Hewitt Associates, who noted that roughly 5 percent of corporations have suspended or reduced their matching 401(k) contributions during the past year.

That figure could “easily” rise to 10 percent before the end of the year if the economy does not begin show signs of a sustainable recovery, she said.

“There are some significant and compelling cost savings that employers are recognizing by halting their match,” said Hess, who estimates that a large company could save up to $25 million a year by eliminating or cutting back on its 401(k) contributions.

In the past six months alone, more than 50 companies in the Fortune 1,000 have suspended their matches, according to research from Lincolnshire, Illinois-based Hewitt.

That translates into a combined annual savings of roughly $1.25 billion for these companies.

Filed by Mark Bruno of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.