Oct 30, 2008 10:30 am US/Central
Some Companies Opting To Scrap 401K Match Plans
SAN FRANCISCO (CBS) ―
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Companies like General Motors are stopping or reducing matching contributions to save money in tough times.
CBS 3
The 401K company match is more than a perk to some workers. It
has come to be known by many as a workplace right. Even so, companies
like General Motors are stopping or reducing matching contributions to
save money in tough times, reports CBS station KPIX-TV in San Francisco.
Goodyear, Frontier Airlines, Dollar Thrifty Car Rentals, & Cushman & Wakefield real estate are all reducing or dropping 401K match. A recent survey by Watson Wyatt global consulting firm found 2% of businesses said they have cut or reduced 401K match plans. But before you get angry, Chad Parks, CEO of The Online 401k said it's not necessarily a bad thing.
"It's a defensive move so they don't have to cut in other areas like do layoffs," said Parks.
But the concern is, if the employer match disappears, so does some of the incentive to save. Michelle Couey's firm has a generous company match plan and said, "I only contribute up to the match. If they got rid of it, I might change my mind and not contribute as much."
Before you change your contribution Parks reminds workers of the tax benefits.
"You will still get a significant tax savings and you are still responsible for saving for your retirement so it's a shortsighted mentality," he said. "If you are already saving and you've earmarked that money, don't change that."
And he said when the economy improves, it's likely companies will bring back their match plans.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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