Are 401 (k) Matches Really Coming Back?


Some of the largest corporations—American Express , FedEx , and JPMorgan Chase —are reinstating the company match to their 401 (k) retirement plans, but whether that represents a trend is a matter of debate.


One thing is certain: The companies bringing back the match are using a number of formulas to determine what their employee contribution will be, including one that allows them to vary the percentage depending on the economy and their own prospects within it.

“They’re [the companies are] continuing to put them back in and continuing to play with them,” Dallas Salisbury, president of the Employee Benefits Research Institute (EBRI) in Washington, told CNBC Tuesday.

“The studies have been limited, regrettably,” added Salisbury. “The data does not indicate that there is any significant change.”

Charles Lieberman
Advisors Capital Management

Salisbury, who has been with EBRI for 32 years, said the various studies have reported that between 40 percent and 60 percent of the companies that took out the match have restored it. But, he said, since the studies haven’t been comprehensive, it’s impossible to assess exactly what the overall situation is.

Following the recession in 2001, said Salisbury, employers who had cut back on their company match were generous with their contributions when they reinstated them to help employees catch up on lost payments. “We don’t have enough data to know whether they are doing it this time,” added Salisbury.

“I think we are seeing a lot of employers who want to reinstate it as soon as possible,” Bill McClain, a principal in the human resources firm , told CNBC Tuesday.

Mercer administers 401 (k) plans to 1.2 million participants.

“They [companies] are squeezed between the economics of being able to fund the plan and their growing concerns about employee retention as the economy slowly improves.”

McClain said that the 401 (k) has much greater significance to employees now than it did 10 years ago, because over that period employers have frozen or closed other retirement vehicles, namely pension plans.

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In addition, he said with employees’ loyalty to employers at an all-time low, due in part to the layoffs of recent years, such perks as the company match are important to attract and retain the people companies want.

According to mutual funds giant Fidelity Investments, however, the match comeback looks rosy.

Comparing Fidelity’s March 2010 study with one it conducted in October of 2009, 44 percent of the companies surveyed had decided to reinstate their company match by March 2011 or had already done so, compared with 22 percent last fall.

Both times Fidelity polled the same 293 companies of various sizes that had in 2009 reported that they had either eliminated or reduced their employer contributions.

“The trend was most apparent with the largest employers [more than 5,000 employees]," said Beth McHugh, vice president of market insight at Fidelity. McHugh said 70 percent of the bigger companies reported in March 2010 that they had already brought back the match or had plans to do so.

Her division analyzes data and the decisions with regard to company matches.

Fidelity handles 17,000 401 (k) plans for 11 million individuals. As of Q1, the average account balance per 401 (k) participant at Fidelity was $66,900.

Michael K. Farr told CNBC Tuesday that with the large number of out-of-work Americans, there is "no rush to bring back" the 401 (k) match. Farr is the author of the retirement book, A Million Is Not Enough: How to Retire with the Money You'll Need, and the president of Farr, Miller and Washington, a management firm. 

But Charles Lieberman, CIO of Advisors Capital Management, countered Farr's statement on CNBC Tuesday.

Companies need to think strategically, he said. "Somewhere down the road, the labor market will get healthy again. And employees are going to remember whether companies treated them well during the recession and in the early part of the recovery. And they might be amenable to moving elsewhere."