Profits take the day as fewer employers match kick-ins to 401(k)s

Drop-off in companies making contributions to retirement plans; trend not 'abating anytime soon'
MAY 01, 2013
Retirement benefits that American companies provide for employees continue to take a hit as a result of the 2008 financial crisis. The number of firms offering workers a matching contribution in their corporate 401(k) retirement plans fell by about 5% in 2010 and another 2% in 2011, according to a survey released by American Investment Planners LLC yesterday. About 42% of the nation’s companies that offer a 401(k) plan also matched a portion of their employees’ contributions in 2011, the survey found. Some companies have eliminated their retirement plans, according to the survey. About 6% of the corporate retirement savings plans that existed in 2009 were terminated in 2010 or 2011, according to the survey, which scrutinized plan sponsors’ Form 5500 tax documents. About 472,625 401(k) savings active plans existed through 2011, the survey found. Some plans have been eliminated because the companies themselves went out of business during the recession. At other businesses, bosses have been pressured to lower plan costs or eliminate them entirely in part because of rising health insurance premiums. Typically, health insurance is a higher priority for employees than retirement benefits. “Companies are struggling to be profitable, and we are seeing 401(k)s taking a back seat to profitability,” said Brett Goldstein, director of retirement planning at advisory firm American Investment Planners LLC. “I don’t see the trend abating anytime soon.” Some observers believe that many companies that dropped their 401(k) match in 2008 and 2009 reinstated them as the economy improved. But the survey shows that this is not always the case, Mr. Goldstein said. Kurt Laubinger, president of Potomac Wealth Management LLC, said companies that reinstated matching contributions that were cut during the 2008 and 2009 time frame may not yet be reflected in that data. One of the plans that he helps to oversee trimmed its match in 2009 and didn’t reinstate it until 2012. “Now they have their match back to where it was before the recession,” Mr. Laubinger said. “Many firms will find they have to offer a decent retirement benefit to hire and retain the best employees.” The number of traditional defined-benefit pension plans also continues to decline, with about a 15% decrease in 2011, the survey found.

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