Pension Woes May Have Led to 401(k) Cuts, Study Finds

Faced with unexpected asset losses and liability growth in their traditional pensions, many employers have suspended matches to their employees' defined-contribution accounts.

Most employers that have stopped matching their employees’ 401(k) deductions have done so in the face of mounting defined-benefit pension liabilities and other retirement-plan burdens.   

That’s the main takeaway from a study issued today by the Employee Benefit Research Institute of 251 401(k) plan sponsors that have suspended matching contributions for their 4.4 million workers. EBRI found that those companies employing 50% of the workers also maintained a fully functioning defined benefit plan.

An added 16% of the employees work for employers that were obliged to fund frozen defined-benefit plans. Eight percent of the workers were with employers that had both a functioning and a frozen defined-benefit plan that carried funding obligations.

“Because of the current economic conditions, many of these employers must make what are unexpected contributions to the defined-benefit plan as a result of asset losses and liability growth, but they can eliminate what are discretionary matching contributions to a 401(k)-type plan,” the authors of the review write.

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