Companies have begun suspending 401(k) matching benefit
The employer match of employee contributions is an important characteristic of 401 plans. The match was designed to encourage participation and contributions — particularly by lower-paid employees. However, at a growing number of companies, the employer match has become a casualty of the COVID-19 crisis and ensuing economic collapse.Although employers have adopted a variety of match rates, the typical employer match consists of a 50% match on 6% of the employee’s salary.
The propensity for employers to decrease or suspend their 401 match in times of economic hardship became evident in the wake of the 2001 recession, when several large companies announced their decision. As the economy recovered, most of these firms restored their original matches. But the phenomenon returned following the 2008 financial collapse and ensuing recession.
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