The vast majority of employers are still contributing to
their workers’ 401(k)s, despite the economic fragility of many firms due to the
coronavirus.
Roughly 11% of employers suspended their company match in
the second quarter, according to the latest retirement savings trend report
from Fidelity Investments.
Retirement matches are often vulnerable during economic
downturns. During the Great Recession in 2008, nearly a quarter of employers
halted or decreased 401(k) contributions. The coronavirus pandemic, and
subsequent market volatility, is no exception. Fidelity’s data is the latest to
find that employers are, in fact, suspending contributions—but at a lower rate
than some predicted.
There’s more good news, Fidelity attests: Of the employers
that suspended their company match, 32% indicated they plan to reinstate their
match in the next year, and 48% plan to reinstate as soon as financially
possible. Just 6% of employers indicated they have no plans to reinstate their
match.
“The company match can help drive participation in a
workplace savings plan while providing employees with a savings goal to aim
for, so we are encouraged to see that the majority of our clients continued to
provide this important retirement savings benefit,” says Kevin Barry, president
of workplace investing at Fidelity Investments.
Fidelity’s report also found that many retirement plan
investors are still committed to saving and haven’t been scared off by the
volatility in the stock market: Most workers (88%) contributed to their 401(k)
in the second quarter, dropping only slightly from last quarter’s record high
of 89%, Fidelity reported. Just under 1% of 401(k) investors stopped their
retirement contributions, and 9% increased their contribution rate.
Industry experts suggest employers continue to encourage
employees to contribute to their 401(k) accounts, despite volatility.
For employers that are suspending or reducing matches, there
are some best practices for communicating the information to employees,
according to industry experts. Among those: Be honest and open about the
changes employers are making to contributions; explain why you are doing so and
give workers an idea of how long those changes may last; tell employees if you
expect the change to be temporary; and explain other rewards employees still
have available.
“If you don’t know how long this will last, say so. And tell
employees what your considerations are, if you know them,” John Lowell, an
Atlanta-based partner with October Three Consulting, recently told HRE. “If you
have no idea what you will be doing, say so. But build a case as to why it is
in that employee’s interest to stay with the company.”
Click
here for the original article.