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Fidelity: Matching contributions key to 401(k) participation

By Lisa Shidler

February 26, 2009 1:22 pm ET

Workers’ participation in 401(k) plans is largely driven by their companies’ matching contributions, so if employers stop contributing, retirement accounts will suffer, according to an analysis released today by Fidelity Investments.

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Fidelity’s research showed that a company match of 50% on every dollar of participants’ contributions, up to 6% of pay, can drive up plan participation by as much as 9 percentage points.

“Many employers, both small and large, are facing tough decisions about employee benefits in this economic environment,” Scott B. David, president of Boston-based Fidelity’s Workplace Investing unit, said in a statement. “We know that when companies eliminate the match to their workplace savings plans, almost half see a decrease in participation and deferral rates.”

Mr. David said that even smaller matching contributions from employers still trigger an increase from employees’ own contributions.

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