Indicator to Watch: 401(k) Match

(MoneyWatch)  A year ago, the 401(k) match became an expendable benefit for a big slice of Corporate America panicked about their revenue prospects in the throes of the financial crisis and recession. Watson Wyatt says about 25 percent of large firms it surveys reduced or suspended their match in 2009. An unofficial tab kept by the Pension Rights Center suggests that plenty of smaller firms followed suit.

401(k) Match Policy Signals Better Job Outlook A new survey from Watson Wyatt suggests employers are slowly easing out of panic mode. Of firms that cut their match this year, 35 percent say they intend to reverse that decision in the next six months. That's a sharp increase from June, when just 5 percent said they were going to reinstate their match in the near future.

Granted, 35 percent is not 95 percent, but the trend suggests that employers are now less concerned about layoffs and more focused on how to retain existing employees and attract new hires.

It's Back -- Sort of Seventy percent of firms in the survey say they will reinstate the same matching formula that was in place before the cut/suspension. But 13 percent say they are coming back with a lower match, and 17 percent say they will now peg their match to annual profits. Seems we have ourselves an emerging New Normal for retirement benefits, too.

Market-Timing Employers Cost Employees Plenty
With Bill Bernstein's strawberry and nausea retirement advice still fresh in my mind, it's frustrating to realize that the firms that pulled the plug on their match in 2009 kept their employees from maxing out on the chance to buy low. It's not just that employees lost their 2009 match; they also lost having that match participate in the 60 percent market rally since the March low. I'm guessing that's not a strategy mentioned in the 401(k) educational material employers dutifully provide to plan participants.