What will it look like if it does?

If you’re like many workers still lucky enough to have a job during this recession, you’ve probably seen your employer cut or eliminate the contribution match on your 401k plan. Mine did.

My company match on 401k contributions was the first thing cut, just after my bonus and any hope of a raise. That didn’t stop me from contributing though. In fact, I increased my contribution rate to offset the loss of company match, and I am convinced that it is a large part of why my 401k balance recovered so quickly from the crash of 2008.

Regardless of how you may have handled the loss of your company match, it looks like the match may be making a comeback in 2010….

According to this SmartMoney article:

companies are increasingly reinstating this beloved perk. In the next six months, 35% of firms that snipped away at their matching programs are planning to bulk them up again, according to a recent Watson Wyatt survey. That’s up from 24% two months ago.

That’s the good news.

The not so good news is that it likely won’t look like it did before the economic melt down. 13% of employers surveyed said they are planning to reinstate the match at a lower level than previous. Others are changing the criteria for matches, by making them based on company performance. Still others are changing different rules.

17% of the companies bringing back the 401k match say they will be basing it on corporate profits. This will make retirement saving variable and harder to anticipate, especially if you work for a large corporation and have little impact on the company profits.

Other companies are switching to a once per year, lump sum contribution. This change would essentially eliminate the dollar cost averaging aspect of the company match, and if most companies elect to contribute at the same time of year, say the first or second pay period of the new year, then you may even be buying high when your contribution is put to work at a time when millions of other dollars are also streaming into the market.

Some employers also said they are considering a vesting period for the lump sum contribution. This means you could earn your 401k match for two years straight, but if you find another job before the 3rd year (assuming a 3 year vesting period)you could be out your entire contribution altogether.

If enough employers make these kinds of changes, it may be the eventual death of the 401k, since without the company match it pales in comparison to an IRA.

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