Firms cutting back on 401(k) Plans
A new survey finds that 29 percent of companies have modified or will change matching contributions in their 401(k) plans this year. One in five will eliminate the match entirely. “Clearly, the economic downturn is causing many companies to reevaluate their 401(k) plan design carefully,” says Grant Thornton’s Gary Gross, who co-authored the survey. “The highest anticipated action reported by all respondents is the complete elimination of the match, which will generate the most cash savings for the plan sponsor.”
“The survey results also illustrated certain trends by industry and by the revenue levels and work force size of the companies,” said Grant Thornton co-author Mark Ritter. “We found that companies in the health care and not-for-profit industries were less likely to make changes during 2009, while companies in the technology, retail/trade and financial services/banking industries were generally more likely to make changes during 2009. Larger employers, whether classified by revenue levels or the size of their work forces, were generally more likely to make changes during 2009.”
“Companies are expecting 2009 to continue to be a challenging year for business growth and financial stability,” Gross said. “The impact on 401(k) plans appears to be greater consideration of lower, and more prudent, spending on matching contributions in order to address cash and profit constraints.