Schwab Joins Others Ending Contributions to 401(k)'s New York Times (03/14/03) p.C1; Walsh, Mary Williams; McGeehan, Patrick
Charles Schwab Corporation recently announced that it would no longer match contributions to employees' 401(k) plans, as the company continues to cut costs and lay off employees. Other companies that have ceased 401(k) matches include Goodyear Tire and Rubber, Great Northern Paper, Tech Data, the El Paso Corporation, and the CMS Energy Company. Experts warn that many employees have opted to participate in 401(k)s solely because their employers' match their contribution and as more companies decide to stop the practice, it is expected that employees will drop out of the plans as well. According to Principal Financial Group, company matches have made 401(k)s the second most popular benefit among workers, but the Profit Sharing/401(k) Council of America says the plans are popular with employers because they can easily adjust their contributions relative to their business cycle. However, analysts contend that matches are typically being reduced or eliminated in struggling industries like the automotive sector. In general, the average match is 3.3 percent of a participant's pay, but that average has fallen to 2.5 percent in 2000 and 2001, according to the council.