As Darcie Brossart, spokeswoman for Dallas-based Wyndham, put it, "It isn't something we take lightly. We were trying to find an avenue to cut operating costs that didn't immediately affect our employees' ability to pay their mortgages or their other bills."
In the wake of the Sept. 11 terrorist attacks that hobbled the travel industry, Wyndham suspended the match for its 9,000 participants and ceased enrolling new workers automatically in the 401(k) program, among other measures, effective Oct. 1. Brossart said the company hopes to reinstate the match by mid-2002 "at the latest."
For now, at least, companies like Chrysler and Wyndham are the exception, major administrators of 401(k) plans say. Few, if any, of their clients are cutting back on their company matches, they say.
At Vanguard Group, for example, only one of the 1,300 plans that the Valley Forge, Pa., company administers has suspended the 401(k) match so far this year, said Ellen Rinaldi, head of executive benefits. Rival Fidelity Investments also said it has seen no trend toward cutbacks.
"Given that companies have sold the idea of 401(k) plans as an important benefit, I honestly think they will do a lot of things before they touch the plan," said Larry Stahly, an consulting actuary with benefits firm Buck Consultants. Still, he added, "If the economy sinks deeper in the coming months, there are no guarantees."
Financial planners recommend that workers keep contributing to their 401(k) if possible, even if their match is suspended.
"You still lower your taxable income," said Laura Tarbox, an advisor in Newport Beach. "Just be sure to remind the company to reinstate that match when things turn around, so they don't forget."
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The Impact of Free Money
Company matches can help 401(k) balances grow much faster. Here's how "match money" would affect a worker making $75,000 a year and contributing 6% of pay, or $4,500 a year, to a 401(k) account that earned an average pre-retirement return of 8% annually.
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With 50% With no company match company match Savings after 20 years $331,323 $220,883 Savings after 30 years $838,327 $558,885 Monthly withdrawal during retirement* $5,026 $3,351
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* Assumes 6% annual gains during retirement and zero balance at end of 30-year retirement
Source: Times research
