Disappearing 401(k) Match - What's Next to Go?
According to "Some Firms Suspend Their 401(k) Match" by Wall Street Journal reporter Jilian Mincer (November 12, 2008), cash-strapped employers are moving quickly to decrease 401(k) plan benefits, shut down 401(k) plans or not create pension incentives in the first place. Ironically, several studies suggest that small companies are in a better position to attract and retain employees if they offer benefits, notably healthcare expenses.
As we tally the cost of the credit crisis, count 401(k) plans as part of the fallout. Healthcare benefits are on the chopping block too. On November 9, 2008, New York Times reporter Nick Bunkley wrote that General Motors is getting rid of lifetime health care coverage for those who had long ago assumed they were all set. In its place, the large auto manufacturer is said to be beefing up pension payments to help offset disappearing medical care goodies. (See "Some G.M. Retirees Are in a Health Care Squeeze.")
If the defined benefit plan is going the way of the dodo bird and now 401(k) plans and health care benefits are leaving town, what's left for the beleaguered employee? Is it possible that benefits will soon become passe? Will individuals be able to cope by quickly saving more, reducing their own costs or both? If not, how is public policy likely to be impacted by a growing class of persons who no longer think of retirement as the "golden years?"
