Some say that eliminating matching contributions to 401(k) plans is a no-brainer. But that isn’t necessarily true. The author of a new study on retirement benefits says companies that suspend or eliminate matching contributions to 401(k)s and other retirement plans may save money in the short term. However, finance chiefs may want to consider such cost-cutting measures in light of longer-term implications, particularly how corporate belt-tightening colors the thinking of former employees.
The report, based on U.S. Census data and issued by independent research firm Employee Benefit Research Institute, looks at how cutting matching benefits may contribute to the sour attitudes that former employees have toward their onetime employers. The study analyzed employees who leave their job but plan to stay in the labor force — even if they haven’t lined up another position — and decided to take lump-sum distributions from employer-sponsored retirement plans, including pensions.
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