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Yahoo Money: Coronavirus: Some U.S. companies eliminate employee 401(k) matches to cut costs

Article By: Dhara Singh in Yahoo Money

As the U.S. economy staggers under drastic government measures to curb the COVID-19 pandemic, some employers are evaluating ways to cut costs. One strategy that’s emerging: Eliminating 401(k) matching contributions.

While Vanguard and Fidelity — both of which manage employer-sponsored retirement plans — haven’t seen widespread adoption of this yet, Yahoo Money identified a handful of companies that have recently done away with their matches or are considering the move.

The efforts come when 1 in 2 Americans are already behind on their retirement savings goals. Losing a 401(k) match adds yet another setback. But the stopgap move now by employers may help them hedge against worse consequences for their workers in the future.

“I completely understand the employees’ perspective,” said Nicholas Tzoumas, president of Clearscope HR, an employee benefits firm. “But if you ask them if you would have your employer reduce the match and increase your odds of retaining a job or have your employer keep the match and the [reverse] happens, most employees would rather take a temporary elimination of their match.”

‘Bring us all through the crisis’

On March 29, Tenet Health, an operator of more than 60 hospitals nationwide, sent a notice to employees informing them that 401(k) employee contributions were being postponed, so it could allocate more resources to its coronavirus efforts. Yahoo Money obtained a copy of the notice.

Yahoo Money obtained a copy of the memo Tenet Health sent out employees alerting them their 401(k) matches would be postponed.

“Every effort is being made to help bring us all through the crisis,” a company spokesperson, told Yahoo Money. “And we have made the decision to direct additional resources to meet the increased demand for healthcare services, address evolving patient needs in our hospitals, and protect front-line staff.”

The spokesperson said the company plans to revisit the decision to temporarily postpone the 401(k) match program later in the year.

To read this article in its entirety in Yahoo Money click here.

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