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Employers restoring 401(k) matches

As economy rebounds, larger firms lead push to reinstate payments

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Amid signs of an economic recovery, many employers that suspended or reduced their 401(k) matching contributions are rethinking those moves.

A survey released last week by Boston-based mutual fund provider and 401(k) plan administrator Fidelity Investments found that 44% of employers that suspended their matching contributions last year either have reinstated or intend to reinstate the match during the next 12 months.

“As the economy begins to improve, employers large and small are bringing back their 401(k) matching programs,” James M. MacDonald, president of Fidelity unit Workplace Investing, said in a statement.

The likelihood of employers reinstating matching contributions, though, varies significantly by company size. For example, among employers with at least 5,000 employees, 70% either have restored or intend to restore the match within the next 12 months, nearly double the 36% of employers with 500 or fewer employees that either have restored matching contributions or plan to do so.

The results are based on a survey this month of 293 Fidelity clients that suspended or reduced their 401(k) matching contributions last year.

Last week, for example, defense and aerospace company GenCorp Inc. said it is reinstating its 401(k) plan matching contribution, the latest in a growing number of employers that have done so or will be doing the same.

In a Securities and Exchange Commission filing last week, Rancho Cordova, Calif.-based GenCorp said it will restore its 401(k) plan match for nonunion employees at the same rate prior to its Jan. 15, 2009, suspension. The match will be restored in July.

Prior to the suspension, GenCorp matched 100% of employees' salary deferrals up to the first 3% of pay and 50% of deferrals on the next 3% of pay.

However, GenCorp now will make matching contributions in cash. It had matched contributions with company stock, which a GenCorp spokeswoman previously said was diluting the stock's value.

A summary of the survey is available at http://personal.fidelity.com/myfidelity/ InsideFidelity/index_NewsCenter.shtml