Updated with correction
Despite recent reports that the economy might have bottomed out, it will be several more months before employers reinstate their defined contribution plan matches, experts say.
Since November, 251 of the Fortune 500 companies have suspended or reduced their matches, according to Hewitt Associates.
However, a June Watson Wyatt Worldwide survey finds that 42% of employers plan to bring back their match in the next 12 months.
But most employers probably won't reinstate their matches until late 2010 or early 2011, experts say.
“My prediction is Jan. 1, 2011,” said Michael Weddell, a Detroit-based principal and senior defined contribution consultant in Mercer's retirement, risk and finance consulting business.
Mr. Weddell says he's date-specific because many employers have 401(k) plans with a safe-harbor plan design, meaning they run on a calendar year and have to announce in November any changes they are making to the plans.
“Jan. 1, 2010, is too soon to make changes because the recession is still going on,” he said. “So I think Jan. 1, 2011, is when you will see some announcements.”
There is no pressure on employers to rush to bring their 401(k) matches back, he said.
“The price companies pay for reducing or suspending their matches is increased turnover,” he said. “But the job market is such right now that people aren't leaving.”
Many employers have started talking about reinstating their 401(k) matches, but are looking closely at whether they will bring them back at the same levels, said Rob Reiskytl, leader of Hewitt's defined contribution consulting practice in Minneapolis.
“We are working with some organizations that aren't just looking at the timing of when to reinstate, but also of exactly what to reinstate,” he said.
Some companies that previously offered non-matching contributions to employees may no longer do so, he said.
Also, many employers are discussing changing their matches from a fixed portion of salary to discretionary matches based on company performance, experts say.
“This is a hot topic of discussion,” Mr. Reiskytl said.
Starbucks Corp., Seattle, announced in December that it was moving from a fixed match to a profit-sharing feature. In late July, the company said it would match U.S. employees' contributions to its 401(k) plan for 2009, which ends Sept. 27 (Pensions & Investments, Aug. 10).
“I think many companies may be looking at this,” said Lenny Sanicola, practice leader of benefits for Scottsdale, Ariz.-based WorldatWork, a global human resources association focused on compensation and benefits. “They are looking at whether their matches were overly generous to begin with.”
Many employers may opt to bring back their defined contribution plan matches incrementally, Mr. Weddell said. “I would guess that some companies will raise it to an intermediate level, then maybe in another year after that go to the previous level,” he said.
And then some employers, particularly in battered industries such as automotive suppliers, might not bring their DC matches back at all, said Jack Abraham, a principal in PricewaterhouseCoopers' HR services group in Chicago.
“There is no guarantee,” he said. “I don't think in my 20 years in this industry that we have ever seen anything this bad.”
Jessica Marquez is a reporter with Workforce Management , a sister publication of Pensions & Investments