Company retirement match remains the norm despite recession

WASHINGTON » The overwhelming majority of companies offering matching contributions to their employee retirement plans have continued putting money on the table to help their workers save for retirement during the coronavirus downturn.

Only 11% of employers suspended their company match in the second quarter, according to the latest retirement savings trend report from Fidelity Investments.

As the spread of the novel coronavirus began to affect the economy earlier this year, many companies, forced to close and send employees home, suspended or reduced matching contributions to their employee retirement plans. Amtrak, citing an unprecedented loss of ridership and revenue because of the pandemic, suspended its 401(k) match.

During the Great Recession, many companies reduced or suspended matching contributions.

Financial experts often chide workers for not contributing at least enough to workplace retirement plans such as a 401(k) account to get the maximum match offer by their companies. Fidelity said the most popular match formula for the plans it manages is a 100% match for the first 3% of employee contributions, and then a 50% match for the next 2%. About 40% of 401(k) plans use this formula, according to Fidelity.

More than three-quarters of workers received an employer contribution in the second quarter. The average employer contribution was $1,080.

“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,” said Kevin Barry, president of workplace investing at Fidelity.

Among employers who suspended the company match, 32% said they plan to reinstate the benefit within the next year, and 48% have plans to restore their matches as soon as corporate finances improve, according to the Fidelity report. Only 6% said they have no plans to go back to matching employee contributions.

The report also found that many retirement plan investors weren’t scared off by the volatility in the stock market. Eightyeight percent of workers contributed to their 401(k), dropping only slightly from last quarter’s record high of 89%, Fidelity reported.