4 tips for communicating a halt in 401(k) matches
With the coronavirus pandemic dealing a financial blow to companies nationwide, many HR and benefit leaders are left making an inevitable choice to save money: decreasing or halting 401(k) matches.
“Industries that have been hit hard by coronavirus are looking for every means possible to stay afloat, and while matching contributions have become customary in many U.S. companies, these companies are considering them a luxury that they cannot currently afford,” says John Lowell, an Atlanta-based partner with October Three Consulting.
That decision is hard for HR leaders to make—but it’s also hard for employees to hear, especially as many workers rely on their employers’ match to help cushion their retirement savings.
So how should HR and benefit leaders deliver the news? Experts and retirement consultants share their advice for how to communicate the information to employees.
Be open and honest. Employers need to spell out the changes they are making to contributions, explain why they are doing so and give workers an idea of how long those changes may last. “If you don’t know how long this will last, say so. And tell employees what your considerations are, if you know them,” Lowell says. “If you have no idea what you will be doing, say so. But build a case as to why it is in that employee’s interest to stay with the company.”
Tell them if you plan on the change being temporary. “If you can, say it’s temporary,” says Robyn Credico, Willis Towers Watson’s defined contribution consulting leader. “Tell them it’s for the overall value of the company and that you’re likely be reinstating it when you can.” That will soften the blow of the news for many employees, she notes.
Explain other rewards employees still have available. Employers can remind employees of other benefits and rewards that employees still have available to them. They also can come up with new benefits or rewards that may appeal to employees to help them or as incentive for staying with the company, Lowell says. “Develop some sort of structure to reward employees who stick with you, at least at the point in time when you are able,” he says.
Encourage workers to keep contributing. It’s wise for HR leaders to encourage employees to continue saving to their retirement accounts, even when the company is no longer contributing.
Even though many 401(k) balances are dropping due to recent stock market volatility, contributing is still the right move for employees’ overall financial health, says Edward Gottfried, group product manager for Betterment for Business, a provider that works with 500 employer clients. “It’s always important to continue to contribute to your 401(k),” he says. “We think it’s good guidance for employers to tell [workers] that any savings they can do today will have an outsize benefit, and it’s important [employees] exercise their option to contribute to this employer plan.”