They cut my 401(k) match!

[Mill]

I have been at my little ESOP company now for almost 3 years, and they announced that effective immediately, due to insurance premiums, our 3% match of 50 cents on the dollar would be eliminated. I know it is/was not a very competitive match, but now...its gone.

Is there anything that can be done about this other than quitting my job? I am thinking about writing HR and the execs an email asking for an explaination.

I dont want to ruffle anyones feathers at w*rk, but we just finished up employee summer parties, which obviusly were an unnecessary expense, and the last time the stock was valued, it supposedly gained 18%! In a year! And that was in February of this year!

Something just smells fishy here. What do you all think?

 

[Lusitan]

Well, I think it stinks. But I don't know if it's worth writing any email/letters to HR about, at least not until you've cooled off a bit. Whether you should look for another job involves many more factors than just whether your employer matches your 401(k) or not.

For what it's worth, my employer does not match our 401(k) contributions at all. So you're not alone.

 

[FUEGO]

"In these difficult economic times", the company sees an easy way to trim labor expenses that most folks won't care about.

We used to have a very generous 6% match. And partially paid health insurance and other benefits. I relied on these benefits as part of my compensation package, and that allowed me to accept a below market cash salary. No benefits any more! And we are an ESOP company too, but since profitability looks unlikely for 2009, no ESOP contribution either. And they have basically said no raises nor bonuses before 2011.

The only solution for you is to do 3% less work to compensate you for your 3% paycut. And send out some resumes if others in your field have better 401k matches.

 

[quietman]

My company eliminated the 401k match as well. Many are doing so. We could lump it or leave. No one left over the issue. It's hard to justify the effort/uncertainty of a new job over such a small sum - especially if lots of campanies are eliminating matches and the new one might do so also.

 

[CuppaJoe]

I have been at my little ESOP company now for almost 3 years....

Something just smells fishy here. What do you all think?

Duh, yeah! I worked for a "little ESOP company" which became ESOP after switching out of numerous other plans in the nick of time so that most employees would never vest. By the skin of my teeth and fortunate timing, I vested in all of their plans and got a bunch of small payouts. (btw, that was not the company I ended with which had an excellent Keogh plan).

Mill & Fuego, what constitutes vesting in your ESOPs?

 

[WanderALot]

Same thing happened at my company about 4 months back. Additionally, they are behind about 4 months in sending in my contributions (ie MY money, not the match!) I stopped my 401k and nearly quit (had another job lined up), but decided to stay after a promise to catch up by the end of the year. We'll see.

 

[Salaryman]

Our company eliminated the 401k matching contributions, dinners on the company for w-rking past 8pm, home access with company laptop, car service home for burning the midnight oil etc etc. I am happy to still have a position, but their actions will get an equal reaction from my decreased productivity

 

[harley]

My Megacorp, at the same time that I left, froze their pension plan. But they made it up with an increased match on the 401k, going from a 6% match to a 9% match, depending on the performance of the company. To my knowledge, there hasn't been an increase over the previously existing 6% match that would come close to the previous pension payment in the past three years since I left. So basically, the pension is gone, the 401k remains the same, and the employee is screwed.

I know this is still better than what the OP described, but I see it as the wave of the future. My advice, L Way BYMs, save in after tax vehicles, and don't kill yourself w*rking for da man!

YouTube - Tennessee Ernie Ford - Sixteen Tons

 

[Ronstar]

Sounds like your company is cutting expenses - the 401k match is an easy one because many companies feel that employees are just happy to have jobs ands wont complain about the cut. Many companies are cutting or eliminating the match.

We eliminated our match at the beginning of 2009. But we may end up funding it anyway because our plan didnt pass the last discrimination test

 

[DangerMouse]

Last company I worked at, when the downturn started the first thing to go was the 401k match. However, I think the remaining 80 employees out the original 250 are just happy to have a job. You are probably lucky that the match has lasted that long as many companies chopped it last year.

You know, a 401k match is not an entitlement, and your indignation and threats of looking for a new job sound rather dramatic, though I can understand why you are annoyed. Don't bother writing to HR about this as this decision was probably originated and decided in Finance. You could get everyone in the company to sign a petition but it would be unlikely to change.

If I was you, I would be putting all my efforts into making myself more valuable to your employer as cuts to the 401k are normally a lead into layoffs and you certainly don't want to appear on that list.

 

[FUEGO]

If I was you, I would be putting all my efforts into making myself more valuable to your employer as cuts to the 401k are normally a lead into layoffs and you certainly don't want to appear on that list.

Or do you?? 57 weeks of government dole, time to recharge batteries, revamp one's skills. Call it a sabbatical if you have to!

I personally treat the 401k match cutting just like a cut in salary. Most of my coworkers don't really care as long as their salaries remain constant. For me, it was 6% of my salary tax free that I no longer get. I'd rather have a 6% salary reduction and keep the 401k match, but I'm sort of unique in that I don't need much of my take home pay to support my family's expenses (unlike most other coworkers).

 

[FUEGO]

Mill & Fuego, what constitutes vesting in your ESOPs?

Vesting over a term of years. Starting with 2 yrs service, 20% vested. Each additional year you vest 20% more until yr 6 when you are 100% vested. I just finished up my 1000 hours for 2009, sufficient to vest me for 2009, so now I will be 100% vested come 12/31/09 regardless of whether I am still employed at that point. Feels good, although the ESOP balance is shrinking due to company value decline and poor investment results.

 

[DangerMouse]

Or do you?? 57 weeks of government dole, time to recharge batteries, revamp one's skills. Call it a sabbatical if you have to!

I personally treat the 401k match cutting just like a cut in salary. Most of my coworkers don't really care as long as their salaries remain constant. For me, it was 6% of my salary tax free that I no longer get. I'd rather have a 6% salary reduction and keep the 401k match, but I'm sort of unique in that I don't need much of my take home pay to support my family's expenses (unlike most other coworkers).

I have to agree, I would have rather taken a pay cut as that would have helped me out tax wise whereas the 401k match was tax free money. However, so many people i know have taken the 401k match cut as well as 10%+ salary cuts.

I actually believe it is beneficial to keep your job no matter how attractive the dole may seem. I think in years to come, if you have on your resume that you were able to keep your job during this extended downsizing, it is going to tell potential employees that you must have been one of the better ones as companies are using this market as an opportunity to clear out their deadwood.

 

[clifp]

My ex-companies 401K contributions were always profit dependent. Most years they were very generous, a couple of years zippo. Eliminating the 401K is understandable as long as they imply this is temporary thing. American's have enough trouble saving money for retirement, they need incentives like employee matches.

 

[Mill]

Mill & Fuego, what constitutes vesting in your ESOPs?

1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years 100%

I dont get how they value these ESOPs though. It was amazing to me that ours went up 18% last year? and now this 401 match elimination.

 

[bssc]

At my Megacorp, they "temporarily" eliminated the 401(k) match too. There didn't seem to be many complaints since I don't think that many people were contributing, which is scary. They cut out all parties and most travel last year so I guess this was next on the block.

 

[Buckeye]

Same thing happened at my company about 4 months back. Additionally, they are behind about 4 months in sending in my contributions (ie MY money, not the match!) I stopped my 401k and nearly quit (had another job lined up), but decided to stay after a promise to catch up by the end of the year. We'll see.

Isn't the company legally obligated to deposit the money by the 15th of the month following the contribution? For example, if you made a contribution on January 1 the contribution must be deposited in the 401(k) by February 15th. Sounds like your company is (or was) breaking the law.

Our company had the 6 year vesting schedule but they also had a retirement age of 50. All profit sharing vested 100% when the employee turned 50. Yessssss! I went from 60% vested on January 1 to 100% vested on February 1 since my 50th birthday was in January.

 

[rescueme]

I think in years to come, if you have on your resume that you were able to keep your job during this extended downsizing, it is going to tell potential employees that you must have been one of the better ones as companies are using this market as an opportunity to clear out their deadwood.

This was my experience as a much younger lad in the early 80's recession.

At the time, in the group I was working in there was an 80% layoff, in addition to a 10% salary cut for those few remaining. Also, since this was a couple of years before IRA/401k's became available (for the common worker; IRA's were available earlier for self-employed) there was nothing other than lose your job - and your pension (in those days).

Your time with the company had no effect on the decision to retain you, or not (yes, the company had union folks, but I was not one of them).

BTW, in the 70's, I worked for a non-profit which also had a pension but at the time the federal rule was that you had to be at a company 10 years before vesting.

I was there eight years, when I moved on (giving up any pension claim).

Today's vesting rules, regardless of a pension (rare) or 401k contributions are much better for those folks that must move on in their respective careers.

Not to dwell on the "old days", but in some ways, today's portable benefit programs are much better as relating to flexibility for the worker.

 

[Mill]

I ended up writing the CEO an email, asking if the match would be reinstated in the future, and his response was along the lines of...not until we offset the insurance increase, and not in the near future.

Check out my thread titled "401k or taxable account" Im going to need some educated opinions.

Thanks.

Mill

 

[ziggy29]

Unfortunately in a job market like this one, employers can screw their workers and get away with it. One can only hope the ones that do so when it's not a matter of corporate survival get their comeuppance when the economy turns and the market once again becomes a job seekers' market and they find their best people leaving in droves. Feels like a long ways away, but you never know.

 

[bubba]

Same thing happened at my company about 4 months back. Additionally, they are behind about 4 months in sending in my contributions (ie MY money, not the match!) I stopped my 401k and nearly quit (had another job lined up), but decided to stay after a promise to catch up by the end of the year. We'll see.

Hey, not to butt into your business, but you'd better keep a real close eye on this deal. Your employer is breaking the law unless the law has changed recently. They cannot hold your money. Hopefully you will be able to recover these funds.

 

[Sarah in SC]

I agree with the other folks, WanderALot. That is actionable if my understanding of employment law is correct.

I would be totally freaking out about this. It is the same thing as not sending in the employment taxes. You need to tell someone at the company that you are putting in a call to the Employment Securities folks in your state if it isn't resolved immediately. The federal law that covers this says that your contributions should be sent in within a "reasonable time" which is understood to be within 2 weeks and 4 weeks from the payroll withholding date.

I know personally of a company fined for this practice, and they were only late by a week or so beyond the 4 weeks.

 

[youbet]

As others are saying........ A company can (and these days it's common) cut 401k matching. But they can't hold the money you contribute to the 401k plan. I'd dig into that very quickly as there is no good excuse.......

 

[Sarah in SC]

Last year DH's company got into trouble with the feds on their plan and had to close it, so we spent an entire 12 months with no 401k plan for him. Really made me mad.
Fast forward to this year--I find out that the multiple employer plan we have is going to be closed because of some shenanigans of one of the other employers...my plan is closed! Losing $7k of deferrals this year (and the match, of course) and won't be able to contribute to the new one until Sept 2010.

Believe me, losing the 401k entirely sucks way more than losing the match. But I share your irritation.

 

[RunningBum]

Unfortunately in a job market like this one, employers can screw their workers and get away with it. One can only hope the ones that do so when it's not a matter of corporate survival get their comeuppance when the economy turns and the market once again becomes a job seekers' market and they find their best people leaving in droves. Feels like a long ways away, but you never know.

You're right about that, but what will probably happen is that you're going to leave your company for mine, not knowing that I was getting screwed during the hard times, and I'm going to jump to yours, not knowing you were getting screwed.