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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (19085)	3/25/2009 10:29:59 PM
From: Giordano Bruno	Read Replies (1) \| Respond to of 71475

Thanks again taxpayers Many U.S. Employers Cut 401(k) Matches By JILIAN MINCER Workers and companies are making lots of cuts in 401(k) contributions, at what is probably the worst time in terms of potential impact on long-term savings. The moves come as cash-strapped individuals and businesses tighten their belts to survive the recession. But they also come at a time when savings have been shrunk by the stock-market decline. Some of the most dramatic numbers came Wednesday in a report released by Spectrum Group. The relatively small survey of 150 plan sponsors in February found that 34% of U.S. employers have reduced or eliminated the company match to the retirement savings plan in the past 12 months. Another 29% plan to make changes in the next 12 months. The margin of error was plus or minus eight percentage points. "It's an immediate cash-flow reduction for companies," said George H. Walper Jr., president of Spectrum Group. A separate Spectrum online poll of 400 active retirement-plan participants found that 20% of employees had decreased their savings rates and another 5% planned to in the next 12 months. Another 14% said they plan to increase their savings. Spectrum said the research had a margin of error of plus or minus 4.9 percentage points. "Do you spend less on groceries or do you save less in your 401(k)?" said Mr. Walper. "These are tradeoffs people are making." A report released in February by consulting firm Watson Wyatt found that as the recession continues, workers have been hit hard by salary freezes, higher health-care costs and reduced 401(k) matching contributions. That survey of 245 large U.S. employers found 42% had frozen salaries. It also found that 12% had reduced 401(k) matches, and another 12% expect to do so. Many companies announced changes in 401(k) matches while reporting fourth-quarter earnings and wanted to demonstrate they were cutting costs, said Lisa Arko, a senior consultant at Watson Wyatt in Philadelphia. Not surprisingly, many companies in the most-distressed industries -- retail, newspapers, auto and gaming -- dropped or decreased the match. Some firms are reporting much lower declines in matches than either study. Matt Diliello, product manager for retirement-plan services at T. Rowe Price, said 7% of large clients have made some sort of change to their match as of March 25. "We think a good portion of those changes are temporary," he said. Fidelity Investments, the nation's largest provider of workplace retirement-savings plans, said as of the beginning of 2009, about 4.6% of its plan sponsors had suspended or reduced their matches. Most of the changes were made by small businesses, it said. Fidelity recommended that companies, rather than cutting the match entirely, consider other approaches such as adjusting the match formula or limiting eligible populations. Dallas Salisbury, president of the Employee Benefit Research Institute in Washington, said that companies may be suspending their 401(k) matches because they're having to make significant contributions to battered pension plans. The largest traditional pension plans operated by U.S. corporations had record losses of more than $300 billion, completely erasing the gains racked up in the prior five years, according to a report released Tuesday by actuarial and consulting firm Milliman. Jack VanDerhei, research director at the nonprofit Employee Benefit Research Institute, said what's most significant is whether the suspensions have a long-term impact on retirement readiness. A similar trend occurred several years ago when the economy slipped after the dot-com bust. At the time, a number of large companies, including Charles Schwab Corp., Ford Motor Co. and General Motors Corp., temporarily reduced or suspended their 401(k) match. Almost all of the firms later reinstated it. Write to Jilian Mincer at jilian.mincer@dowjones.com