Suspend Your 401(k) Match?

Searching for ways to stem losses, many companies have opted to suspend 401(k) matching. Many more are considering it.

Is it a smart move? Unthinkable?

Good question.

On the one hand, it’s simple. Mr. Employee, would you prefer a small cut in pay or a layoff? After all, if the company runs out of money, nobody will have a job. No telling how long the recession will last.

On the other hand, benefits like these set your business apart. Eliminate them and you might lose the employees who have good options. A 2007 Fidelity Investments survey found that a full 70 percent of employees believe a retirement plan is critical to attracting and retaining them. (Incidentally, the number one benefit for attracting and retaining employees was still medical benefits.)

Just a phone call away.
The lure of eliminating the 401(k) match is that it’s easy and immediate. You know what you’re spending each pay period – it’s a line item on your financial statement – and you could stop it with one phone call to your plan administrator.*

But is it that easy?

Sure, it’s the proverbial no-brainer from a financial perspective. But what about morale? Productivity? Loyalty? Attrition?

A tough call. That’s why business owners like you enjoy the opportunity to make the big bucks. Tough calls like these.

If you have experience or perspectives on these matters, please share them with us. Also, if you are considering such a move, what are your decision criteria? Email us at info@thebusinessowner.com or place your comments right here. Our new website accommodates them.---
* Companies operating under certain IRS “safe harbor” rules must give their employees 30 days’ notice of a change in the 401(k) matching policy.