Suspending the Employer 401(k) Match

by Alicia H. Munnell and Annika Sundén

June 2003

IB#12

Introduction

Charles Schwab & Co.’s decision in March 2003 to suspend its matching contribution to its 401(k) plan made headlines. But Schwab is not the only company to suspend the employer match. This Issue in Brief looks at the nature of the employer match in 401(k) plans, the role that the match plays in individual participation and contribution decisions, the extent to which firms are cutting back on their matching 401(k) contributions, and the implications of the cutbacks for individuals and the plans themselves.

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Alicia H. Munnell is the Director of the Center for Retirement Research at Boston College (CRR) and the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Annika Sundén is a Research Associate at the CRR and a Senior Economist at the Swedish National Social Insurance Board.