What to Do if Your Employer Stops Its 401(k) Match
If other companies follow in IBM’s footsteps, employees will need to make some adjustments in their retirement savings.


In early November, IBM made news by announcing it would end the company’s 401(k) matching contribution, effective at the end of this year. IBM’s 401(k) plan offered a generous dollar-for-dollar match on the first 5% of salary from employee contributions. IBM is replacing the 401(k) match with a 5%-of-salary contribution to a retired benefit account (RBA), which appears to be essentially a cash balance plan. IBM says funds inside the RBA will earn a fixed rate of 6% for the next three years.
Why did IBM do this? This change allows IBM to switch its retirement contribution from a defined contribution of the company to a defined benefit of the employee. At year-end 2022, IBM had $53 billion in defined benefit assets and an overfunded pension of roughly $15 billion. The change will free up substantial cash for the company since the 401(k) match required current funding, while the RBA contribution may not require funding, given IBM’s overfunded pension.
IBM was one of the first large companies to adopt the 401(k) in 1984, so it’s possible other large companies with overfunded pensions may follow suit and end company contributions to 401(k) plans.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If your employer terminates its 401(k) match, what should you do?
Revisit the asset allocation of your 401(k) contributions. If the company 401(k) match shifts to a cash balance-type plan, like IBM, then it may be appropriate to increase the equity allocation of your 401(k). Cash balance plans offer a fixed rate of return, so think of this account as delivering bond-like returns.
Under a 401(k), the employee controls the investment allocation of both their contributions as well as the company’s match. Under a cash balance plan, the investment allocation of the company contribution is now under their control. It’s not uncommon for the annual company match to a 401(k) to equate to roughly 25% of the total annual retirement contribution for an employee. With that 25% now locked into bond rates of return, participants may need to be more aggressive in how they invest their 401(k) contributions going forward.
Increase your employee deferral. If the expected return of your retirement nest egg is reduced because of more bonds in your portfolio, you may need to increase your contribution rate to meet your long-term goals. Let’s assume you’re 25 years from retirement with a current 401(k) balance of $100,000 and you’re contributing $20,000 a year to your 401(k) with a goal of $2 million. If you earn a 7% annualized return, you’ll be nearly $200,000 short of your goal. Increasing your contribution by just $2,000 a year gets you to your goal!
Consider a Roth IRA. Roth IRAs offer an excellent savings vehicle. Unlike a traditional IRA, contributors don’t receive a tax deduction, but earnings and distributions are tax-free (with some holding period requirements). While there are income limits for making direct Roth contributions, the backdoor Roth IRA loophole enables those with incomes over the limit to still make such contributions. Backdoor Roth IRAs can be tricky, so be sure to consult your tax or financial professional.
Now, more than ever, achieving retirement security requires constant vigilance. A benefit that many employees took for granted may soon disappear, so if you aren’t already maxing out your employer match, now’s the time to start.
Related Content
- Benefits of Doing Roth IRA Conversions Early in Retirement
- Are Roth IRAs Really as Great as They’re Cracked Up to Be?
- Inflation Relief: Workplace Benefits Can Be a Big Help
- Can I Hire a Financial Adviser to Manage My 401(k)?
- Four 401(k) Mistakes to Avoid While Saving for Retirement
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Mike Palmer has over 25 years of experience helping successful people make smart decisions about money. He is a graduate of the University of North Carolina at Chapel Hill and is a CERTIFIED FINANCIAL PLANNER™ professional. Mr. Palmer is a member of several professional organizations, including the National Association of Personal Financial Advisors (NAPFA) and past member of the TIAA-CREF Board of Advisors.
-
Cord Cutting Could Help You Save Over $10,000 in 10 Years
How cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement Rule
The '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
You Were Planning to Retire This Year: Should You Go Ahead?
If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get It
The Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
Consider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care Solution
If you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a Recession
Recessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income Planning
Once you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.
-
Why Smart Retirees Are Ditching Traditional Financial Plans
Financial plans based purely on growth, like the 60/40 portfolio, are built for a different era. Today’s retirees need plans based on real-life risks and goals and that feature these four elements.
-
To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around You
While thinking about succession planning might feel like anticipating a landslide (here's to you, Fleetwood Mac), there are strategies you can implement to manage the uncertainty and the transition.