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Employers Cutting 401(k) Matching Contributions

Roughly 12% of employers have suspended matching contributions and an additional 23% are planning to cut their match or are considering it.

The pandemic, which has changed the way millions of people work, is also starting to change the way they save — and not in a good way.

Some 12% of employers have suspended matching contributions to their 401(k) plans, and an additional 23% were planning to cut their match or were considering it, according to a survey conducted in late April by Willis Towers Watson, a human-resources consulting firm. A separate survey by the Plan Sponsor Council of America found that nearly 22% of companies with 1,000 or more employees are suspending or reducing matching contributions to 401(k) plans. Companies in hard-hit industries, such as retail and travel, were more likely to suspend contributions to employees’ retirement plans.

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How quickly matches are restored will depend on how fast the economy recovers, but many companies hope the suspension will last only a few months, says Robyn Credico, defined-contribution practice leader for Willis Towers Watson. “I think there’s a lot of belief that by the last quarter of this year or early next year, things will improve,” she says.

Although a company match provides a great incentive to contribute, don’t use the loss of your match as an excuse to stop saving, Credico says. Instead, if you can afford it, try to contribute a little more to make up the difference. With or without a match, she says, “your retirement needs aren’t going to change.”

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