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November 3, 2008
General Motors made headlines for suspending its 401(k) match last month. But dropping 401(k) matches when companies are under financial pressure is nothing new. Employer matches are not required or permanent, but most employers historically contributed from the birth of 401(k) plans in the 1980s through 2000. By 2001, matching contributions were equal to about 12 percent of firm profits, according to the Profit Sharing/401(k) Council of America.
But then recession caused many companies to re-evaluate their retirement plans. Between the 2001 to 2003 financial turmoil, a number of large companies suspended their contributions to employee 401(k)'s. Most of the companies eventually restored their matches to continue to attract talented employees, according to Alicia Munnell, director of the Center for Retirement Research at Boston College. GM, for example, suspended its 401(k) match in 2001 and restored it when the recession ended (and then scrapped it again this year). Goodyear, on the other hand, had a 401(k) match elimination go into affect in 2003 but plans to bring back the company contribution in January 2009 at 50 percent of the first 4 percent of pay—regardless of the financial situation.