In New York Times today, there was an article about large companies cutting 401(k) retirement plan contributions. The companies are doing this to reduce expenses so that they can improve their financial performance in this economic downturn. Improve performance to help benefit the stockholders and lenders to the detriment of the employees and their families.
In many companies, when an employee contributes money to their 401(k) retirement savings plan, the company will match some portion of it. Sometimes, the company will even make a flat percentage contribution each year to the plan for the employee, as a profit sharing contribution.
During the 80’s and 90’s there was a movement in corporate America away from defined pension plans towards 401(k) plans. The responsibility for saving, for a time when one could no longer work, shifted from the company to the individual. Workers were told that they could no longer count on a pension plan but, that the employer would ‘contribute’ to the long term savings of the employee. It would become a partnership.
Will this match/contribution ever come back? Was this the only savings that was left to make? Was reducing, rather than eliminating the contribution considered? Was the corporate jet sold, were all executives told to travel coach? Were all company perks eliminated like the subsidized corporate cafeteria and country club memberships. Were the salaries of the top 10% of executives in the company cut?
For myself, up until recently, I worked for several large corporations and participated fully in their 401(k) plan, making the maximum contribution. The company made a point of telling me that their contribution was a part of my ‘total’ compensation and that the company was putting in money as a way to help me save for my future.
Now for many, that is gone, at least for now? I have a hard time believing that it will be put back into place, that the company will take on the extra expense, when they have already proven that they didn’t need to have if for people to work there.
This is another example of corporations taking the easy road towards improving company performance. Some might say that this was a much better option than cutting more jobs and I agree. However, where are employees to go if they are not happy with this reduction in their compensation? How are employees going to be able to one day stop working? How are they going to be able to save for the day when they can no longer work?
This is very troubling. I would feel better if I knew that all the ‘fat’ was cut out of companies…. and if this were done, I would feel better because it would be about saving jobs. However, I don’t believe that is the case.
Tags: 401(k), corporate compensation, economy, Individual Retirement Account, IRA, retirement, retirement savings
