Many firms feel that dropping the company match will have disastrous results when it comes to participation — but there’s research that suggests otherwise.
Harvard and Yale found that participation rates were hurt when plans with auto enrollment dropped the match — but perhaps not as much as you might think.
Example: When plans that offered automatic enrollment went from offering its workers a standard match (50% on the first 6% of pay) to stopping the match altogether, participation dropped anywhere from just 5% to 11%.
So, if your company has to drop its match — even though that’s not ideal — your plan will probably be OK, especially if it includes auto enrollment and escalation.
However, if you do drop the match, you may want to consider using some of the money that had been designated for the match to beef up other benefits.
Why? Companies have been able to boost participation by adding Roth contributions, investment advice and automatic rebalancing to their retirement plans.