Does it have to be all or nothing?

Does it have to be all or nothing?

For the past several months, the PRC has been maintaining a list of companies that have reduced or stopped matches to their 401(k) plans.  When the economy takes a turn for the worse as it has in the past year, companies view cutting 401(k) matches as an easy way to reduce costs.  Recently, Business Management Daily published an article for employers on how to break the news to employees and how to encourage employees to continue saving despite the loss of the match.  The article cites a Fidelity Investments report showing that the company match helps significantly as an incentive to get employees to contribute and as an incentive for employees to increase the amount that they contribute themselves. 

Of the companies on our list, the vast majority have ceased their 401(k) matches completely, which raises the question: does it have to be all or nothing?  What if a company reduces the match, as some have?  A company that is contributing a dollar-for-dollar match up to six percent of the employee’s salary could temporarily lower the match to 50 cents on the dollar up to six percent.  Such a move would continue to provide the incentive that many employees need to save (during hard economic times, some might stop contributing to their 401(k)s themselves if there is no match), while temporarily lowering costs for the employer.

Tough times do call for sacrifices, but it is worrisome when cost-cutting measures fall squarely on the shoulders of the workers.