The number of companies providing matching money for employees’ 401(k) plans is shrinking as business owners try to save money, according to a recent study by a retirement plan firm.
American Investment Planners LLC, a retirement plan consultant for businesses, conducted a 401(k) performance survey and found that 5 percent of employers who provided matches dropped the match in 2010 and another 2 percent dropped it in 2011. American Investment based its numbers on a database of active 401(k) plans.
“Clearly, as businesses look for ways to lower expenses and improve bottom lines, it is not surprising that businesses have stopped matching,” says Brett Goldstein, director of retirement planning at American Investment Planners, based in Jericho, N.Y. “I have been studying this trend for the past four years and don’t see the trend abating anytime soon.”
A total of 42 percent of the companies with active 401(k) plans in 2011 did not provide money to match employees’ savings, the survey shows.
The survey also shows that the number of companies that offer 401(k) plans is declining. In 2009 there were approximately 520,000 active plans, in 2010 there were 488,000 and by 2011 that number had dropped to 472,000, he says.
The number of traditional defined benefit plans also decreased by 15 percent in 2011, Goldstein says.
Goldstein recommends business owners work with a financial advisor to find other ways to cut expenses overall or to reduce the cost of the retirement plans rather than eliminating them or doing away with the matching funds.
“Health benefits and 401(k) plans are the things a potential employee looks for from an employer. An employer could miss talented people he could hire if he does not provide these benefits,” Goldstein says.