US. Employers Need to Reinvent Retirement-Savings Match
One of the building blocks of the U.S. retirement savings system is the employer match. If workers contribute to their retirement savings, 54% of employers will contribute as well, according to a recent report by the Plan Sponsor Council of America (PSCA). By helping people prepare for retirement, the match boosts the financial security of workers while giving employers additional workforce flexibility.
The recession threatens to undermine the employer match as we know it. According to a survey by the PSCA, about 25% of employers are considering suspending or reducing their matching. Such cutbacks would significantly reduce retirement savings, given that the most common match involves the employer contributing 50 cents for every dollar saved by the employee, up to 6% of pay.
These are tough times, but the current crisis presents an opportunity not to abandon the match but to reinvent it. For companies struggling to pay their match, there are ways to reduce costs while motivating workers to save. And for companies not planning suspensions or cuts, the strategies can improve the impact of the match on savings behavior.
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