What to do if your employer stops matching retirement contributions because of the coronavirus


As employers look for ways to save money during the pandemic, workers may get less money in an unexpected place: their retirement account. A handful of companies, including Amtrak and Marriott International, are reducing, delaying, or temporarily halting matching contributions to employees' 401(k)s.

Matching contributions are free money that companies kick in to encourage their workers to save for retirement. Two-thirds of companies match between 3% and 6% of pay, according to Vanguard's How America Saves 2019 report. That can be worth thousands of dollars a year. 

But experts say that just because you're getting less from your employer, doesn't mean your contributions should stop too. 

Most companies are staying the course

It's not usual to see companies changing their company match policies during tough economic times. At the height of the Great Recession in 2008-2009, nearly 1 in 5 companies offering a retirement plan match (18.5%) suspended or reduced it, according to a 2009 report from the Plan Sponsor Council of America.

"We've seen this in the past. Employers are trying to figure out a way to reduce cash flow until we move out of this downturn," says Niv Persaud, a certified financial planner and managing director at Georgia-based Transition Planning & Guidance.

What is a 401(k) match and how can you take advantage of it?

Video by Ian Wolsten


Jerry Patterson, senior vice president of income and retirement solutions at Principal Financial Group, says the retirement plan provider has seen a "modest increase" in the number of plans suspending contributions, although more employers have been asking about their options.

Most of the inquiries and suspensions concerning Principal's plans have so far have come from companies in industries hardest-hit in the pandemic, like those in hospitality, Patterson says.

"Right now, most businesses and most individuals aren't panicking or overreacting — they're taking a wait-and-see approach," he says.

What to do if your employer cuts its matching contribution

If your company does reduce or halt its contribution, the first thing to keep in mind is, odds are it's a temporary problem. Employers who made such cuts during the Great Recession began resuming their match as the economy recovered, and experts say that's likely to be the case this time around, too.

In the meantime, it's important to try to keep up with your regular contributions — match or no match. "Keep contributing," Persaud says.

Patterson says 98% of participants in Principal's retirement plans are "sitting tight — they're not doing anything" and are keeping up with regular contributions and not touching their portfolio. That's the right move.

If you're struggling with bills, Persaud says, "instead of stopping your contributions, try and lower the percentage you're contributing."

Instead of stopping your contributions, try and lower the percentage you're contributing.
Niv Persaud
Managing director, Transition Planning & Guidance

Before you do that, Persaud recommends looking at your bank statements and budget to identify areas where you can reduce nonessential spending (such as subscription services that you may not use, for example), and saving money that way.

Cutting your retirement contributions should be your last resort, she says.

That's because keeping up with your contributions even when the market is down helps set you up for success as it recovers. Lower stock prices mean investors can buy more shares while prices are low. And consistency is the easiest way to tap into the market's long-term track record for growth, financial expert Suze Orman told Grow last year.

"Keep putting money in month in and month out," Orman says. "And in the long run, I think you'll be great."

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