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The match game

With the stock market tanking, people saving for retirement through their company's 401(k) plan have yet another reason to worry: more and more employers are suspending their 401(k) matching contributions. This means that some workers will no longer receive a dollar-for-dollar match from their employer for the money that they themselves contribute to their 401(k).

While an employer match isn't required, it is an important incentive for getting workers to save for retirement. And of course, the additional money helps a 401(k) to grow. But during times of economic crisis, when companies are looking for ways to trim costs, eliminating 401(k) matches is an easy step for them to take.

Unfortunately, for the employee, stopping the match means that their 401(k) account won't grow as quickly. Some people might stop contributing to their 401(k) altogether without a match.

Stopping a 401(k) match represents yet another slide down the slippery slope of broken retirement promises. First, an employer switches from a traditional pension plan to a cash-balance or hybrid one, which typically provides a lower level of income in retirement. Then, the employer freezes its pension plan completely and either starts or increases the company match to a 401(k) as "compensation." Finally, the employer decreases or stops even the 401(k) match, leaving workers entirely on their own to save for retirement.

There is one consolation: even though the list of employers suspending matching contributions continues to grow, many of the companies on the list have said that they hope the restore the 401(k) match once their economic situation improves.


I was laid off 3 months ago. I am in the process of changing my 401k to a ira. Can the company that laid me off get back any of the money they matched me?

Editor's Response:
Scott, that's a great question. A lot depends on your specific situation including how long you worked for your company, the vesting schedule for your 401(k) plan, and the circumstances surrounding your termination of employment. You can start by reading about vesting rules for 401(k) plans here: http://www.pensionrights.org/policy/legislation/ppa_2006/fastervesting.html. Then you can visit Pensionhelp America at www.PensionHelp.org to find out where you can go for more help.

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