Wednesday, November 12, 2008

Small businesses cut back on 401(k) matching contributions

Some small businesses are suspending their 401(k) matches (free WSJ Digg link). This is an unfortunate and disturbing trend. A 401(k) is an extremely important benefit to employees, as seen in these numbers:

A 2007 survey of small businesses by Fidelity Investments found the plans were very important to workers. Almost 70% of the employees said a retirement plan "was critical or very important for businesses to attract and retain employees." The study also found that 49% of employees who had retirement plans said they wouldn't move to companies without them.
I can relate to this. My first real job was with a big company with good benefits. I left it to go to a small company, and the small company's retirement plan was an important consideration. The match at the small company wasn't nearly as good (but the job was much more interesting, so I ended up taking it).

I was especially surprised to learn that only 15-20% of small businesses offer 401(k) plans. I'd like to know the definition of 'small business' used in the survey. Every company under 100 people I've worked for has offered a 401(k) plan.