Retirement Plans Take A Hit As Employers Cut Back On Matching

A new study, conducted for Charles Schwab Corp. by CFO Research Services, found that a quarter of U.S. employers have eliminated matching contributions to employee 401(k) retirement plans since September, to save money amid the economic downturn, Reuters reports. A quarter of U.S. employers also have instituted limited enrollment, rather than open the savings plans, to all employees, according to the study.

Despite the study showing 23% of companies have eliminated 401(k) matching contributions, most see the move as temporary and not a long term approach.

Workers with 401(k) plans have seen their savings hit hard in the recession. A 401(k) account allows workers to defer taxes on some income and typically put the money in a mix of stock and bond mutual funds and other investments. Companies often matched all or part of employee contributions.

When employees were asked to identify the most important feature of their company’s 401(k) plans, 87% of those polled said it was the company’s match. Second most important was providing employees access to 401(k) investment advice, the study said. Of the 107 human resource and 112 senior finance executives polled, 63% said employee concerns over personal finances are creating a more difficult work environment.

The survey was conducted in March and April among executives at companies with revenues ranging from $100 million to more than $10 billion in a cross-section of industries. More than half of the respondents worked for companies with more than 1,000 employees eligible for participation in their 401(k) plans.