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For years, workers have relied on their employers to help them build a path toward a comfortable retirement. After a few potholes during the financial crisis, companies are now starting to answer that call once more -- and smart workers can take advantage of their willingness to help them rescue their retirement while that help is still available.
Over the past two years, many workers could point to their employers cutting back on employee benefits, including those related to retirement. In particular, the money that many employers provide to encourage participation in 401(k) plans -- known as employer matching -- disappeared in many cases. But despite many high-profile companies that had to cut benefits, including American Express (NYSE: AXP ) , General Motors (NYSE: GM ) , and Eastman Kodak (NYSE: EK ) , it now appears that many employers were able to stay the course. And even among those that didn't, many -- including AmEx, GM, and Kodak -- have reaffirmed their commitment toward their workers' financial health by restoring those matches.
A depressing history
When it comes to workers and retirement, the move in corporate America over the past few decades hasn't been great for employees. Past generations could expect long careers with a single employer as well as a healthy monthly pension once they decided to retire. Combined with income from Social Security, an employer pension allowed many workers to retire with little or no savings of their own to enjoy at least a modest lifestyle.
Over time, however, many employers have moved away from traditional pension plans toward retirement savings vehicles that require employees to take much more responsibility for their own financial well-being. Retirement plans like 401(k)s, which require workers to make their own contributions from their paychecks in order to fund their retirement, put workers in the position of having to choose investments that will let them reach their financial goals. And if a bad market environment -- like the one we've seen over the past decade -- gets in the way, then workers are the ones left holding the bag.
As a consolation prize of sorts, workers often receive a matching contribution from their employers when they put money into their 401(k) accounts. But to add insult to injury, some employers took away their match during the financial crisis -- leaving workers to face the double-whammy of plummeting account balances as well as disappearing matching contributions.
The new reality
The good news is that this trend isn't as bad as many had feared. According to a recent survey by the Profit Sharing/401(k) Council of America (PSCA), around 80% of employers either left their matching contributions unchanged or actually increased them between 2008 and 2010. Among the remaining 20% or so that made cuts, over a third have already restored their matching.
Ford (NYSE: F ) is a good example of the phenomenon. In late 2008, the company appeared to be in serious financial trouble. In response, it implemented a number of cost-cutting measures, ranging from cutting benefits to suspending merit-pay raises and bonuses and laying off workers. By early last year, the company realized that both financially and from a morale perspective, restoring the lost match was the right move.
Not every company has been able to get back to normal, however. At least as of August, despite improving economic conditions, Unisys (NYSE: UIS ) and Honeywell (NYSE: HON ) hadn't restored their matching contribution cuts. Sonoco Products (NYSE: SON ) did a partial restoration, dropping from a 100% match on 3% of pay to a 50% match on 4% of pay, amounting to a 1-percentage-point decline.
Employer matching is a key attribute of a 401(k) plan and makes a huge difference in whether workers participate. But even if your employer backs away from its obligation to you and other workers, you need to stay aware that when it comes to saving for retirement, you're the one who needs to do the heavy lifting. Don't give up on your 401(k) just because matching goes away; it may remain the best tool you have in retiring comfortably.
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