Towers Watson

An analysis of 260 employers that suspended their 401(k) matching contributions in the depths of the recession has found that most have restored them, although some now offer a lower level of benefits.

The report, from the professional services firm Towers Watson, found that about three-fourths of the employers that suspended matching contributions after 2008 have now brought them back.

The finding is encouraging, Towers Watson said, since so-called defined contribution plans like 401(k)’s are now the predominant retirement vehicles for workers. Still, about a quarter of the companies have not reinstated their matches — and that’s “problematic,” the report notes, because matching contributions are a crucial tool in getting employees to participate in retirement plans.

Of the companies that have reinstated their matches, 105, or about three-fourths, reintroduced the original match. The most common level of matching contributions is half of up to 6 percent of an employee’s salary.

Slightly less than a quarter of the companies that had suspended the matching benefit brought it back at a lower level — about half their previous match, the analysis found. And 3 percent reinstated the matching benefit at a higher level to help make up for the lost benefits.

The suspensions occurred from January 2009 through January 2010, although the vast majority occurred in the first half of 2009. The median length of the suspensions was 12 months.

The reinstatements began in 2010. Employers in manufacturing and health care have the highest reinstatement rates.

Did your employer suspend 401(k) matches during the downturn? Have they been restored?

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