Employers are under no obligation to make matching contributions to 401(k) plans, as they usually are with traditional pension plans, and can alter the terms without seeking government approval. A difference of 3% points on a matching contribution can add up to hundreds of thousands of dollars over the course of a career.
Corporate tinkering with 401(k)s accelerated in the wake of the 2008 financial crisis. About 18% of 334 companies surveyed by consultant Towers Watson suspended or reduced contributions to conserve cash. Yet when the liquidity crisis subsequently eased, matches offered less generous contributions than before the recession.
Companies also save costs through lengthy vesting requirements, forcing employees who leave to forfeit unvested contributions.
"Top executives with high compensation likely don't care what their company contributes to a 401(k)," says Mike Alfred, CEO of BrightScope, a San Diego firm that ranks retirement plans. "But for employees in the ranks, it can mean the difference between financial security and scarcity in old age."
Source: Bloomberg BusinessWeek, February 24, 2014
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