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.
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.