Big corporations cut 401(k) matching funds

10/11/2001

Nationwide, some large companies are reducing their 401(k) plan matching contributions.

Local plan administrators say that trend has not hit the Toledo area. But some say if the economy continues to slump, employers might reduce discretionary matching funds after the end of the year.

Filings with the U.S. Securities and Exchange Commission this year indicated that a number of corporations contributed less to 401(k) plans last year than in 1999 - including Boeing, Campbell Soup, Kmart, Lucent, Bank of America, and retailers Kmart and Sears & Roebuck.

Lucent, Campbell, and Kmart changed their plans to tie matching contributions to corporate profits, which have been declining. Boeing and Bank of America blamed their lower contributions on layoffs, and Sears noted that its match was reduced because employees contributed less to their accounts.

The Big Three automakers have begun 401(k) reductions. The Chrysler unit of DaimlerChrysler AG recently capped matches for highly paid workers, General Motors Corp. trimmed its matching program by a fourth, and auto-industry analysts say Ford Motor Co. is considering following suit as a cost-cutting maneuver.

Mike Burns, senior consultant with Findley Davies, a Toledo firm that handles about 170 401(k) plans, said he has seen no noticeable matching-contribution cuts by Toledo-area companies.

The typical firm matches up to 50 percent of contributions on up to 6 percent of employees' pay, said Mr. Burns. But, he added, some companies have a pot-sweetener: a discretionary match at the end of the year. That most often happens with fast-growing companies looking for income-tax savings, he said.

Unless the economy improves, some of those companies may decide to eliminate the discretionary match, according to Mr. Burns.