Approximately 218 companies suspended their 401(k) match between January 2008 and November 2009, according to a new analysis by the Center for Retirement Research at Boston College. Researchers Alicia Munnell and Laura Quinby estimate that 4.9 percent of all 401(k) participants were newly matchless at some time during this period. The majority of employers slimmed their match between December 2008 and May 2009, with the peak occurring in February 2009.
The companies that suspended their 401(k) contributions generally did so due to a lack of liquidity that rendered them unable to continue their previous contributions, suggests the study of 127 employers with newly suspended contributions and 1,734 non-suspenders. “Firms with more short term assets relative to liabilities are less likely to suspend their match,” the authors write. Large firms and companies in the manufacturing sector were also more likely to suspend their 401(k) match.
The typical employer match is 50 cents for each dollar a worker saves up to 6 percent of the employee’s salary. When a match is eliminated, an employee effectively takes a 3 percent pay cut. For a worker earning $50,000 annually, that’s $1,500.
401(k) match suspensions during the 2001 recession were temporary and they may prove to be for this recession as well. Several large companies, accounting for 1.2 percent of 401(k) participants, have recently restored their employer contributions to retirement accounts. Check out Boston College’s table of companies that suspended their 401(k) match here.