Mercer Warns Against Suspending 401(k) Match

While a suspension of DC-plan matching contributions may make sense for some financially distressed employers, other businesses should consider more “surgical” efforts, the study suggests. That’s because reductions in retirement benefits can significantly undermine employee commitment and morale, it warns.

Bill McClain, a Mercer retirement consultant and the survey’s author, observes that while the loss of 1 year’s employer contribution won’t “have a huge impact” on an employee’s retirement benefit, a reduction can weaken benefits already hit hard by declines in equity values. A suspension would also deny employees of the opportunity to buy equities at historically low prices, and those implications need to be weighed against the organization’s need to preserve capital., he said. He urged employers to try to identify cost savings that would only minimally affect employees’ nest eggs.