Fallout: The Financial Crisis

Firms peel back on retirement benefits

Steve Henn Jun 22, 2009
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Fallout: The Financial Crisis

Firms peel back on retirement benefits

Steve Henn Jun 22, 2009
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TEXT OF STORY

Kai Ryssdal: Those big Wall Street banks aside, most businesses in this economy are looking everywhere they can to save money, besides laying off millions of people. There are furloughs, days off without pay is another way to say that. Hourly workers are having some of their hours cut. And increasingly, companies are reducing retirement benefits. Benefits that might never come back, even when the economy does. From Washington, Marketplace’s Steve Henn reports.


STEVE HENN: Michael Gallo’s employer, a global high-tech firm, recently stopped contributing to his retirement plan. But it is offering him company stock instead. Gallo says stock isn’t as good as cash, but…

MICHAEL GALLO: We all have pretty high hopes and expectations for our company, so it’s not exactly what we would call super-risky.

And Gallo says it’s better than nothing.

Close to a quarter of all companies in the U.S. are considering eliminating or cutting back the amount of money they kick in to their employees 401(k) programs. That’s according to a new survey released today by Charles Schwab.

Michael Cianfrocca at Schwab say for most employers cutting matching retirement benefits is a last resort.

MICHAEL CIANFROCCA: What we are absolutely hearing is that the vast majority are looking to reinstate that match as soon as they can.

Still millions of workers have seen their retirement benefits slashed. And there’s no grantee they’ll be reinstated. For those workers, this raises some unpleasant questions, like is retirement at 65 actually just a pipedream?

CHRISTIAN WELLER: I don’t think the dream of retirement is dead, but it is becoming less of a reality for many people.

Christian Weller at the Center for American Progress says downturns often reveal ugly truths about 401(k) plans. Even during the mild 2001 recession.

WELLER: What we saw is that employers did cut back their matches to 401(k) plans in the last recession and never really fully restored them.

And Weller doesn’t expect this recession to be any different. Ultimately, he believes the country can’t afford build its retirement policies around 401(k) matching programs that companies can cut anytime they are short on cash.

In Washington, I’m Steve Henn for Marketplace.

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