Employer 401(k) matching gets passing grade

Employers are open now, more than ever before, to making the most of their 401(k) matching, according to two retirement advisers. Bloomberg News issued a report in mid-February that hundreds of employers were pulling back their company matches and setting lower limits on annual payments, but many small- to mid-size employer matches are continuing to develop a long-term plan.

“I have more clients today thinking through what they’re trying to accomplish with their match,” says Ed Hinders, vice president at CBIZ Retirement Plan Services based in Cleveland, Ohio. “They’re not just throwing a number out there — more are asking, ‘Why are we doing this?’” Hinders, who represents clients in the $75 million to $100 million range, or as many as 1,000 employees, says this is a good sign.

“The more cutting-edge employers are giving more thought to what the goal of the match is and what they can do with the match to impact behavior,” he says, adding that all of his employers who dropped or lowered their match during the Great Recession have since reinstated it to around 2007 levels.

The sky-is-falling mentality about employer matching could be due to a select few employers. Bloomberg’s analysis showed that Facebook, a high-profile employer that is known for other unique perks like free snacks and drinks and its CEO Mark Zuckerberg’s open-door policy, didn’t provide a match in 2012 and 2013. But, a World at Work report conducted in December 2012 with nearly 500 employer responses showed that 88% “said their company neither suspended nor eliminated their company matching contributions during the previous five years.” Moreover, 77% said there was no change to the amount of employer match in the 12 months prior and were not considering a change in the near future.

‘Through a match’

“We have not seen, in our clients, a new round of employers dropping the match,” says Dan Palmer, a financial adviser at Rehmann in Fort Wayne, Ind. “We are not seeing increases either; most clients are holding steady to whatever their matching was a year ago.” Palmer handles clients with plan assets in the $10 million to $500 million range, including those with 100 to 7,000 employees. He says that while there are exceptions, most employers recognize that they really need to help their employees retire successfully, “and that’s through a match.”

He hopes that one tool he’s starting to see gain traction in the market will incentivize both employers to match more, and employees to contribute more into their 401(k)s. “When you get a quarterly statement or log on to a site, the piece of information it says is here’s how much your monthly income in retirement is going to generate,” Palmer describes of Putnam, Mass Mutual and other retirement providers that are starting to prioritize this view over simply displaying an employee’s total balance. Still though, he says that while employers can give more, “The match has a powerful impact on changing behavior.”