About three-quarters of companies that suspended or reduced matching contributions following the 2008 financial crisis have reinstated the matches, according to a Towers Watson study.
The study looked at 260 companies that either suspended (231) or reduced (29) their 401(k) match and found that 75% of the companies that suspended matches chose to reinstate them. Reinstatement data were unavailable for 26 of the 231 companies that originally suspended matches. Of those that did reinstate the match, 105, or 74%, reintroduced the original match amount.
About 23% of companies that originally suspended the match reinstated it at a reduced rate. The reinstated match was slightly more than half of the original contribution. Only 3% of companies now offer a higher match, increasing by an average of 1.4%. In all but one of those cases, the higher match was associated with a defined benefit plan close or freeze.
“Actually, the (reinstatements were) about the same as in 2003 when there were a lot of suspensions,” said Robyn Credico, senior retirement consultant at Towers Watson. “The good news is that employers are still committed to helping employees save for retirement.” She said there were about 30% more suspensions or reductions in 2008 than during the 2003 recession.
The most common match formula before and after the 2008 crisis was 50%, up to 6% of salary.
Of the 29 companies that reduced matches, about 31% have since reinstated their original match formula. The median duration of the temporarily lower match rate was 12 months.
Ms. Credico said that for companies that have not reinstated pre-crisis matches, the reductions will most likely be permanent.
The largest wave of reinstatements came at the beginning of 2010, with 40% of companies reintroducing a match. The median duration for match suspensions was 12 months. Most companies reinstated their match after nine or 12 months.
Manufacturing and health-care sectors had the highest reinstatement rates in the analysis, at 88% each. The entertainment sector had the lowest rate at 50%, followed by financial at 53% and publishing at 62%.