Financially stressed companies are trying to eliminate employee benefit costs, increasingly by reducing or axing 401(k) company contributions. FedEx and Motorola both announced that they were suspending their 401(k) matches last week. They joined the ranks of General Motors and Kodak and many other financially struggling companies that are trimming their 401(k) employer contributions in an effort to free up cash. And more companies are planning to thin their 401(k) match next year.
A Watson Wyatt survey conducted in October found that 2 percent of companies had already reduced their employer 401(k) or 403(b) match and another 4 percent planned to do so within 12 months. A recent update to that survey conducted this month found that 3 percent of the companies surveyed have now slimed their 401(k) match and another 7 percent of firms will begin their retirement contribution diet next year.
But the 401(k) weight reduction plan won’t be the only cause of scrawnier nest eggs next year. The number of employees taking loans from retirement accounts has jumped from 19 percent in October to 27 percent in December, Watson Wyatt found. And 59 percent of employees have moved their 401(k) or 403(b) investment mix out of equities, compared with 53 percent in October. If only dieting were as easy as slimming down your nest egg.