One of the best plans that safeguard employees come retirement is the 401(k). With the 401(k), employees can “defer” portion of their income to their 401(k) fund which remains untaxed until withdrawal. Many opt for the 401(k) with some even opting for it as their sole retirement fund.
One its biggest draws is that many employers also match employee contributions to their 401(k). However, with the recession forcing many companies to pinch pennies, employers have now stopped matching contributions. Many question the value of 401(k) contributions.
Just how much does a company save by eliminating that benefit? Hewitt Associates ran the numbers in an April survey. For a company doing the typical match (50 cents for every dollar an employee contributes up to 6% of pay), the cost savings is about $1500 per worker. That can add up to a lot — anywhere from $2 million for a small company to $25 million for a large firm, Hewitt says.
The problem when employers stop matching contributions may come out in different forms. While many companies resume matching the contributions when the economy picks up again, the unmatched contributions ripples through the final value of the fund come withdrawal. Some employees also get a sense of the futility of contributing if they go unmatched and ultimately stop working on their 401(k).
Source: CNN
